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Making Tax Digital: No penalty for missing first filing

1st Aug 2019
Tax Writer Taxwriter Ltd
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wrangling time

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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Replying to EnglishRose:
By Southwestbeancounter
06th Aug 2019 18:12

Agreed! The only 'saving grace' for us is that we use Taxfiler for the bridging software and it gives us a nice submission receipt with all the nine VAT boxes clearly shown below.

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Replying to EnglishRose:
By johnhemming
06th Aug 2019 20:05

Bridging software can give a copy of the vat return submitted via Xero or QB or whatever (as well as a copy of the vat return submitted by the bridging software).

Importantly those figures are from HMRC's servers so they show what is recorded by HMRC.

That can be printed to PDF.

What I do is I make the system wait 15 seconds after submission of the vat return and then it queries HMRC's servers to find out what is on them and displays that.

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By djtax
07th Aug 2019 11:04

It all just proves what almost everyone said last year - that the HMRC pilot was woefully limited.[I accept the point made by one contributor above that a pilot of any new software will not pick up all problems at once but in this case it seems that a lot more issues could have been identified and resolved if the pilot had been more comprehensive.]

I wonder how many VAT Returns (of those that should now be mandated on MTD) are still being completed on the old system and whether HMRC will ever admit to the number - which I suspect is sufficiently large to demonstrate that HMRC preparation was indeed woefully inadequate.

The House of Lords report last Autumn recommended that mandation be delayed, which would have allowed those comfortable with the new system to use it immediately (and assist HMRC ironing out any remaining bugs and niggles) whilst others could continue to use the old system and get themselves up to speed over the next year or so. In practice that seems to be exactly what has now occurred, despite HMRC pointedly disregarding all the Lords committee's report recommendations at the time it was published.

NB I for one was under the impression that the new MTD system would be sufficiently well programmed to identify most of those mandated (ie mainly those whose previous four quarterly returns reported turnover over the threshold) and thereby programmed to refuse a submission on the old system (which has not proved to be the case): we did all see those advance warning notices when submitting the last few returns on the old system prior to mandation, which now seem to have disappeared.

It all confirms my opinion that HMRC are no longer interested in (constructive) feedback from our profession. RIP 'Working Together'.

Thanks (5)