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Making Tax Digital: No penalty for missing first filing

1st Aug 2019
Tax Writer Taxwriter Ltd
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Businesses that missed the deadline for signing up for MTD, so can’t file their VAT return using MTD software, won’t be penalised as long as they file the VAT return on time using the old HMRC portal.

This information was provided in an email to tax agents from HMRC’s MTD for Business Customer Readiness & External Stakeholder Team, sent 1 August. The full statement says:

“If you have clients that pay by direct debit the sign-up window has closed for the 7 August. Do not worry we won’t penalise them this time, so file the old way and come back when the DD has been collected to sign up in time to file the next return. Although we will not penalise them, they will receive a letter from us telling them that they missed the deadline and asking them to take action.”

This will be a big comfort to the thousands of tax agents who have been waiting for the confirmation of MTD sign-up to arrive from HMRC. This email is supposed to be issued within 72 hours of a successful MTD sign-up. However, there is currently a delay in sending out these emails so it may take a little longer than 72 hours to receive the confirmation.

ASA issues

Accountants have also been struggling with a range of MTD-related issues, not least with the Agent Services Account (ASA). HMRC acknowledges that there have been teething problems with the ASA, and the communication around what the ASA does has been confusing.

HMRC is running an extra webinar on the ASA at 2pm on Monday 5 August. The presenters will try and answer as many questions as possible about the ASA during those webinars, both orally and as written answers.

Misnamed account

Some of the confusion is rooted in the assumption that the ASA would be the agent’s equivalent to the Business Tax Account (BTA). It is not.

The BTA is a dashboard which businesses use to manage all of their HMRC taxes (corporation tax, VAT and PAYE). The BTA allows the business to view upcoming tax liabilities, any penalties issued, and change permanent information about the business such as address or VAT stagger periods.

The ASA, in contrast, currently has very limited functionality. More features are being added all the time, although sometimes you have to take a back door to get to them (see the managing clients’ VAT records section below).

All in the software

The design of MTD is based on the premise that all tax agents will use sophisticated MTD software that pulls information in from HMRC’s systems and displays it in a way which is useful to the agent. This means that much of the information which is available to your clients through their BTA is not available to you, unless your MTD-software provides it for you. Some of these applications can be found by filtering the list on AccountingWEB’s MTD software comparison table.

Top of the list of gripes by tax agents is that the ASA does not show the complete list of clients linked to the ASA or signed up to MTD. The professional bodies have been pushing HMRC to develop this functionality, but so far the ASA will only show the number of client authorisations which have been copied over from the old HMRC online services to the ASA.

Incidentally, the term “linked to the ASA” has been changed to “copied to the ASA” to make it clear that clients’ information held by HMRC remains on the old HMRC online systems, although it has been copied to the ASA. The data that HMRC holds for each client should not get out of sync, even if the VAT liabilities are manged through MTD, and its PAYE and CT liabilities are not.

Managing the VAT return

Second in the chart of MTD moans is that the tax agent doesn’t get a confirmatory email that the VAT return has been received by HMRC’s systems. This is another feature which the MTD designers assumed would be provided by the MTD software. However, not all MTD software is providing this automatic confirmation.

Your client should be able to see whether the VAT return has been received by checking their BTA, but the MTD system doesn’t send a confirmation email to acknowledge receipt of the VAT return, as happens when submitting a VAT return through the old HMRC portal.

If you want to print the VAT return to have a permanent record of what has been submitted, this also must be done through the MTD software.

Managing clients’ VAT records

This is a back-door into the ASA, which allows the tax agent to update certain information about each client’s VAT status. You can use this feature to:

  • Change the VAT registration status, including cancelling the VAT registration
  • Change the business name if the business is a limited company
  • Amend the address of the principal place of business
  • Change the VAT stagger period or change from monthly to quarterly filing

You need the user ID and password for your ASA and information about the business for which you want to change details.

Note, you do not go to your ASA directly, but must use the link on this page.

Not enough pilot

Many of the problems outlined above are process issues, which HMRC and the software developers are trying to solve. They are simultaneously trying to solve all the small niggles which arise from rolling-out the live system.

If MTD had been put through a longer pilot period, as all the professional bodies asked for, we would not be in this position of worrying about late filings because of processes breaking down.  

Replies (57)

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By Matrix
02nd Aug 2019 07:45

I assume they could still be penalised for not keeping digital records though since MTD is not just about the filing mechanism.

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Easy MTD VAT
By EasyMTDVAT
02nd Aug 2019 10:15

You mention the AccountingWEB’s MTD software comparison table. We've been trying to get on that table for months but every email I send in (to many email addresses) to try to do so never gets answered.

I would appreciate a reply from someone at AccountingWEB about getting on your comparison table please.

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Replying to EasyMTDVAT:
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By Echo761
05th Aug 2019 10:14

I just clicked on the link above and ... voila.. it worked!

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By Jackie in Wiltshire
02nd Aug 2019 10:57

"Top of the list of gripes by tax agents is that the ASA does not show the complete list of clients linked to the ASA or signed up to MTD".

The ASA DOES show a list of clients. It does not show the list of linked clients, but it does show the list of clients who have signed up for MTD (in my case I will not be signing up all my VAT clients to MTD). Their VAT number is given, with a field to enter a reference, which I have used to provide the client name. Look under Manage User Access, then under the tab marked "Clients".

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Replying to Jackie in Wiltshire:
Stepurhan
By stepurhan
02nd Aug 2019 11:10

It DOES NOT show the complete list of LINKED clients. Which, if it had been designed sensibly, it should.

Similarly it should have been set up to show the client name automatically. We should not have to manually enter a reference to be able to identify clients in the list.

Also having the client list under "Manager User Access" is hardly intuitive. There should be a client list link on the front page.

The ASA is a bad design all round.

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Replying to stepurhan:
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By GHarr497688
02nd Aug 2019 11:17

MTD = shambles

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Replying to stepurhan:
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By Jackie in Wiltshire
02nd Aug 2019 11:35

I made it clear that the list shown was not that of all linked clients.

I agree with the rest of your comments. I was merely pointing out that the list is actually there. We have to make the best of what we have been given to work with.

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Replying to Jackie in Wiltshire:
Stepurhan
By stepurhan
02nd Aug 2019 13:02

Jackie in Wiltshire wrote:

I made it clear that the list shown was not that of all linked clients.

I understood that.

Unfortunately the quote you used when pointing that out specifically referred to the ASA not showing a complete list of all linked clients. Your use of the capitalised DOES in your response indicated you considered that sentence incorrect. Hence my response.

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By GHarr497688
02nd Aug 2019 11:40

Oh so now its ok to break the law ! Thanks HMRC .
Its time you came out and said its not working very well at all .

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Easy MTD VAT
By EasyMTDVAT
02nd Aug 2019 12:45

During our months of frequenting AccountingWeb, we’ve noted numerous gripes about HMRC’s Making Tax Digital (MTD) for VAT and I guess Rebecca's article highlights that.

Although we appreciate there are some who have had negative experiences with MTD for VAT, we have also seen many (of our clients at least) that haven’t. It is common for people to announce problems but less common for people to announce success stories. Joe Bloggs will tell you that A, B and C are broken, but wouldn’t likely announce that A, B and C worked perfectly. As such, the perception of MTD for VAT being flawed and unworkable is likely skewed and criticism of HMRC a little unfair.

From a software developer’s perspective, we know all too well that releasing a new product will result in some problems rearing their ugly head – no matter how much testing and piloting is done. Microsoft, with all its resources, never rolls out a product that is flawless. Why would HMRC be any different?

HMRC knew there would be issues with MTD for VAT which is why they have a soft landing period. A period in which they can iron out problems, improve functionality, and introduce features that benefit the end user – without the end user being penalised. You may think they should have done this during the piloting phase, but again, as a software developer, we know that until a product goes live certain issues don’t become apparent.

We are not saying that HMRC are complete angels and should be void of criticism. They certainly don’t seem to have the staff to deal with user problems in a timely fashion (if at all). Even for MTD software developers it can take weeks for HMRC to answer questions, and it took them an entire month to get us on their “find software list” following our demonstration to them!

We also feel that HMRC’s “find software list” could have been better designed. There aren’t enough filters for users to whittle down the huge number of solutions to a list that is better targeted for their needs. It must be extremely time consuming and frustrating for businesses and agents to trawl through the many approved solutions to find one that meets their requirements perfectly.

Anyway, I’m sure you all have better things to do with your precious time than read my ramblings so I’ll conclude things with this thought…

When HMRC moved from paper VAT returns to the online portal, how many businesses and agents were initially up in arms about that? A fair number no doubt. Now I suspect the vast majority of businesses and agents would agree that the online portal was an improvement over the paper filing system. After the inevitable problems have been rectified and new user requirements have been introduced, I suspect the vast majority of businesses and agents will see MTD for VAT as an improvement over the online portal.

Have a great Friday and happy filing.

Thanks (0)
Replying to EasyMTDVAT:
By SteLacca
02nd Aug 2019 13:30

EasyMTDVAT wrote:
Microsoft, with all its resources, never rolls out a product that is flawless. Why would HMRC be any different?

Because, unlike Micro$oft, a commercial company built to make profits, HMRC are Government administration for the collection of taxes required to be paid by law, and it is not unreasonable to expect their systems ostensibly designed to do that to work out of the box, rather than be a beta product which will potentially cost the taxpaying public, or the Treasury, a significant amount of money.

Thanks (3)
Replying to SteLacca:
Easy MTD VAT
By EasyMTDVAT
02nd Aug 2019 14:29

My point was that no matter how many resources you have, no matter how much time you spend testing, and no matter how much money you throw at a software/IT solution, there will ALWAYS be issues.

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Replying to EasyMTDVAT:
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By Echo761
05th Aug 2019 10:20

There will ALWAYS be issues, yes... but they could be mitigated by further testing, a longer lead-in period, deferral of the start - so it did not coincide with the BREXIT shambles, reverse charge for the construction industry, etc, etc.

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PJ
By paulgrca.net
02nd Aug 2019 13:07

HMRC - Making Tax Digital for VAT: service availability and issues.
Why are HMRC not reporting any problems on this page?
I had an internal server error on a VAT return submission on Wednesday and was unable to submit the form - software company told me the error lies with HMRC leave it for a day and then try again. HMRC are not telling us anything!

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Replying to paulgrca.net:
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By johnhemming
02nd Aug 2019 14:10

HMRC did give out information to developers and I put it into AW.

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By memyself-eye
02nd Aug 2019 14:29

I submitted an MTD VAT return via 'Taxfiler' using an excel spread sheet. the only cells actually required - taxfiler asks you to click on them them in order, 1 to 9 and it highlights them in yellow- were the usual nine VAT boxes. (although the spread sheet contained the underlying records). This I presume is the bridging software bit.
It strikes me that all I needed to do was create and download a simple one page sheet with only nine cells, numbers entered manually, which is what we used to do under the 'old' system.
Hardly 'digital' though and completely pointless.

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Replying to memyself-eye:
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By Farkhem Hall
05th Aug 2019 13:03

Yes, it really is that simple. Pointless yes, but very simple. What's all the fuss about?

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Replying to memyself-eye:
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By Southwestbeancounter
05th Aug 2019 14:18

Yes we are using Taxfiler and it has worked well once we realised they didn't issue us with a specific template, we just designed our own and voila! I still cannot see how this is going to fill the tax gap though and there was a lot of hassle with setting up the ASA and getting clients registered at HMRC etc to get to that point!!!

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Jennifer Adams
By Jennifer Adams
02nd Aug 2019 14:51

V glad no penalties for 1st non/late submission. A client of mine got himself in a state because he sent his June 2019 return via the 'old' HMRC page and thought he's be penalised.

Thanks (1)
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By Matrix
02nd Aug 2019 16:07

I note that the software providers on this thread seem to think MTD is fab.

Has anyone seen Keith Gordon’s tweet about what is the point of MTD and HMRC press office came back with:

10 billion is lost in mistakes of which 3bn is attributable to VAT. MTD will help tackle this gap while also giving people like Georgina more time to run their business: https://www.youtube.com/watch?v=9_j8B15KDZE

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Replying to Matrix:
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By johnhemming
02nd Aug 2019 16:28

There are in essence two potential routes for digital tax. One is SAF-T and the other is MTD.

I think MTD is sufficient and a lot easier than SAF-T.

SAF-T does involve providing all the transactions to the tax authorities.

There is a separate question as to whether ensuring there is an automated link between lists of transactions and the final totals is something that will reduce the tax gap.

I don't have enough information to know the answer to that. It does, however, change arithmetical errors from careless to intentional if people are not doing the digital links post 1/4/20.

I accept there is valid criticism of the process, but it does not necessarily take a lot of time or money to do it. Because I have not being doing much marketing I tend to get clients who have had difficulties with other systems, but it doesn't necessarily take long to get things right.

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Replying to Matrix:
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By Seadog
02nd Aug 2019 20:09

Oh please !

Thanks (2)
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By Kaylee100
02nd Aug 2019 21:00

Most of ours will file on time under MTD. Those that wont are unable to file the old way because theyve applied and moved over. The problems they are encountering is getting it right digitally.

They have a digital solution but thought it would be easy. And why not, have you seen the QB advert? HMRC never gave any indication it might be tricky - "hardly any cost" anyone?

But they are struggling. With feeds, with matching in Xero where theres payments on account, what does cash or accrual system mean, the transactions for HP, the journals for motor scale charge. Allsorts.

Its tricky bookkeeping stuff and they dont have a clue and they are not ready to file.

Then theres extra work because the software itself doesnt report sufficiently. Like Xero not showing the invoice number on the VAT box 1 detailed list. Took me ages to sufficiently check the details was accurate and all invoices had been included on an accrual VAT reporting client of mine.

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Replying to Kaylee100:
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By johnhemming
02nd Aug 2019 21:43

I accept that there are issues. However, the underlying questions are whether or not to do digital tax and if so whether to do the minimalist MTD approach or SAF-T

In the same way as you can cite cases with problems I can cite cases with no problems and zero external cost.

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Replying to johnhemming:
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By Echo761
05th Aug 2019 10:26

I'm glad you eventually accept there are issues....

Cite all the "good" examples you like but the fact there are so many "bad" feedback stories shows that it is ill thought through and badly implemented.

If this was a roll out by Microsoft, they would quickly find customers leaving in droves.

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By spuddle
05th Aug 2019 10:26

Registered for MTD pre 31 March to trial the system. Submitted via Sage no problem. Come to submit June return - wouldn't submit - Sage licence updated (thanks to Customer Services this morning) - tried to submit but now saying "an error has occurred when communicating with the submission service. Please try again later". Tried to add myself to my linking software but unlike all others I've added the software doesn't recognise me as registered for MTD. ...... Happy Monday!

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By [email protected]
05th Aug 2019 10:28

I have been trying to sign up my clients to MTD for VAT using the link on HMRC's website for about 10 days. I sign into my ASA and then it asks for my client's VAT no. It then asks to confirm the VAT no, and then everytime an error message comes up saying " We are experiencing technical difficulties, please try again later". I try to sign up my clients twice a day but the same thing happens.I have performed all the necessary steps up to this point and have copied all my clients across to the new ASA, but I cannot get past this point. I have contacted HMRC who did not have a solution. Does anyone know a way around this or is experiencing the same problems?

Thanks (1)
Replying to [email protected]:
Chris M
By mr. mischief
05th Aug 2019 11:23

I had similar issues with 2 clients. I spent a total of 5 minutes on them combined. See my earlier posts but in essence:

1. File using the portal.
2. Send standard letter to HMRC.

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By AndrewV12
05th Aug 2019 10:32

M.T.D, was always going to end in tears, this is just the beginning before the real crying starts, you know the tear in the eye and the grinding of the jaw precursor.

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By AndrewV12
05th Aug 2019 10:36

Is it to late to scrap it, we may have to row back on bigger issues....... which one .....Brexit

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By Stalytax
05th Aug 2019 11:36

If its any help to anyone, I was getting a fatal error when trying to authorise my clients with HMRC using my default browser, Firefox. It just hung there waiting for something that never happened, frustratingly not until after I had completed all the boxes and reached the final step in the process.

In desperation I turned to doing the same rigmarole using the default Microsoft browser that came with Windows, Edge, it worked straight off and let me repeat the process for my other clients.

All my registration emails have now been received, though I haven't tried to use my new bridging software yet.

It looks to me that HMRC have simply assumed that everyone uses Microsoft Edge and not bothered to test anything else.

After a lot of time ignoring us with their 'what coul;d possibly go wrong?' approach, HMRC's chickens will shortly be flocking home to roost en masse. I predict repeated amnesties as chaos ensues, as happened with RTI. I still don't see what it achieves other than the security of knowing that the client's garbage out corresponds exactly to HMRC's garbage in.

Thanks (1)
Replying to Stalytax:
By SteLacca
05th Aug 2019 12:08

Stalytax wrote:

I still don't see what it achieves other than the security of knowing that the client's garbage out corresponds exactly to HMRC's garbage in.

What, you mean like RTI does? Oh, wait.......

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Replying to Stalytax:
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By EnglishRose
06th Aug 2019 18:01

That is very useful to know. even that alone puts me off all this - I just use Firefox. Why should HMRC force me into a different thing? Even just clicking to use a different browser will feel like theft of my time.

Also it should be all over HMRC letters to us sueful - use internet explore; don't use fire fox. Yet I haven't seen that once on anything from HMRC yet. Typical.

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By david.bransbury
05th Aug 2019 12:51

I am surprised nobody has asked this already.

On what basis can they charge penalties.

As has been argued on here before the only potential basis requires a written warning before a financial penalty is raised. Is this what the letter going to say.

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By CoxE
05th Aug 2019 13:18

Something a bit different - we decided for expedience, that wherever DD payment was not involve, we would use one of our email addresses as the contact address. So far so good, except that when the emails from HMRC, requesting confirmation arrived, three out of 4 were time expired within a little over 30 minutes.
Two questions for anyone who might know: what is the time limit? How do we try again if we have an expired link (we have 3 with no clues as to what to do next)?

David Cox

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By CoxE
05th Aug 2019 13:19

Something a bit different - we decided for expedience, that wherever DD payment was not involve, we would use one of our email addresses as the contact address. So far so good, except that when the emails from HMRC, requesting confirmation arrived, three out of 4 were time expired within a little over 30 minutes.
Two questions for anyone who might know: what is the time limit? How do we try again if we have an expired link (we have 3 with no clues as to what to do next)?

David Cox

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Morph
By kevinringer
05th Aug 2019 13:27

The replacement of the expression when refer to joining the old GG from “linked to the ASA” to “copied to the ASA” is misleading because clients added to the old GG after linking are also linked to the ASA. That is because the link is dynamic. "Copied" suggests it is a static copy.

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Morph
By kevinringer
05th Aug 2019 13:29

As predicted, this is going to be like RTI. Clients are still not being penalised for late RTIs because HMRC still has to get a grip on it. I can see us being in the same place with MTD for several years.

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Morph
By kevinringer
05th Aug 2019 13:46

I objected to MTD because 39% of my clients used paper records and would struggle to digitise their transactions and could not afford to pay someone to do it for them. By 'struggle' I mean they didn't have a computer, didn't have internet, have never used a computer in the life.

All these problems with the ASA don't address the fundamental issue of digitising transactions. I've got my ASA working and have got bridging software working and have got MTD exemption for 25% of my clients but I still have 14% who are struggling yet won't qualify for exemption and an unknown quantity that are making a hash of it. I haven't got a single client who has benefitted from MTD. All have incurred costs in terms of time and money.

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By tanyajackson
05th Aug 2019 16:51

Can anyone tell me if the client has to have their own tax account?
I have clients on both Quickbooks and Xero and Xero worked well and the clients appeared on my ASA list of clients, however all clients on Quickbooks failed and they advise that the client needs their own HMRC tax account for it to work.
TIA

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Replying to tanyajackson:
By Charlie Carne
05th Aug 2019 20:12

No, the client does not need to have their own login to a business tax account. But you do need to link your QBO login to your ASA (just once and it will then cover all of your QBO clients), just as you presumably did for Xero (though the process may be slightly different).

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Replying to tanyajackson:
Morph
By kevinringer
06th Aug 2019 09:48

We've had a lot of problems with QuickBooks Online MTD. Several times we've had to contact QB support who have talked us through removing our ASA from QBO and putting it back on. We can then submit MTD returns but it stops working after a week or so and we have to do it again.

Clients will already have their own tax account because it has been needed for the last 10 years to submit VAT returns via the old GG account, even if the agent made the submission.

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Replying to kevinringer:
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By johnhemming
06th Aug 2019 17:47

That sounds like the refresh getting out of phase. (rather than not happening).

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By tanyajackson
05th Aug 2019 16:51

Can anyone tell me if the client has to have their own tax account?
I have clients on both Quickbooks and Xero and Xero worked well and the clients appeared on my ASA list of clients, however all clients on Quickbooks failed and they advise that the client needs their own HMRC tax account for it to work.
TIA

Thanks (0)
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By tanyajackson
05th Aug 2019 16:51

Can anyone tell me if the client has to have their own tax account?
I have clients on both Quickbooks and Xero and Xero worked well and the clients appeared on my ASA list of clients, however all clients on Quickbooks failed and they advise that the client needs their own HMRC tax account for it to work.
TIA

Thanks (0)
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By tanyajackson
05th Aug 2019 16:51

Can anyone tell me if the client has to have their own tax account?
I have clients on both Quickbooks and Xero and Xero worked well and the clients appeared on my ASA list of clients, however all clients on Quickbooks failed and they advise that the client needs their own HMRC tax account for it to work.
TIA

Thanks (0)
By Charlie Carne
05th Aug 2019 20:20

Rebecca Cave wrote:

This is a back-door into the ASA, which allows the tax agent to update certain information about each client’s VAT status.


Thank you for this link, Rebecca. This is very useful and I'd not heard of it before. So typical of HMRC not to link from within the normal ASA!

By the way, if you have connections with the relevant people at HMRC, please ask them to also allow the client email address to be amended, as well as their physical address.

Thanks (2)
Replying to charliecarne:
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By johnhemming
06th Aug 2019 17:48

I would be surprised if HMRC agreed to allow agents to change the client's email address. The client's email a address is normally a key communication channel to the client and part of verifying the client's identity. Hence allowing anyone else to change it makes the processes less secure.

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By North East Accountant
06th Aug 2019 09:33

Glad in a way in case there are any issues with the last few filings, mine included.

Seeing the VAT Returns zip through the software to HMRC it is so easy to see how HMRC can just change the law and ask for all transactions.

As the condoc dated 15 august 2016 states;

"HMRC will use the data in the updates to build a better understanding of each business. In turn this enables HMRC to more easily identify those businesses who deliberately do not comply with their tax obligations and to focus its efforts on them".

Quarterly could become monthly and monthly could become real time.

So a little bit of late good news folks but don't forget what is coming down the line. Oh and Capital Gains returns to be submitted within 30 days of completion from April 2020. We already do these for Non UK Resident Companies and believe me it can be very tight to report on time.

Good luck to all in the MTD trenches these last few days and I hope you enjoy a well earned break thereafter.

Thanks (1)
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By EnglishRose
06th Aug 2019 18:05

taht sounds like two really awful things - no immediate confirmation email from HMRC that the VAT return has been received (which I always print and file); secondly no easy pdf I can print out and also save to my computer.

I wonder if bridging software can give you a pdf type quality full page of the VAT return as submitted just like the current VAT returns?

Nothing seems better. Everything seems worse.

Thanks (1)

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