MTD: Another GIANT deferral announced
In June 2019, we revealed that NHS trusts and government departments had been granted a deferral of their start date for MTD for VAT. We now know those organisations won’t be able to start filing VAT returns under MTD until at least April 2022.
Public sector entities that are required to provide additional information alongside their VAT return are among the list of businesses that have a deferred start date for MTD.
All the other business in that deferred list are expected to enter the MTD regime for the first VAT period beginning on or after 1 October 2019. However, public sector organisations, such as NHS trusts and government departments that use a special online system known as the GIANT service to submit additional VAT transaction information, will have a further deferral.
In June 2019, HMRC announced that GIANT users would not be able to start using MTD for VAT from 1 October 2019, and instead would be given a different start date to be revealed further down the line. On 27 September 2019, HMRC informed the professional accountancy and tax bodies that the MTD start date for GIANT users would not be before April 2022.
The reason given in June 2019 for this delay was that the rules may have to be adjusted following a potential reform of the VAT refund conditions for central government. The structure for that reform was expected to be set out in a policy paper provisionally titled: “VAT Simplification and the Public Sector”. This paper is eagerly awaited, as it was scheduled for release following the Spring Statement on 13 March 2019, but it still hasn’t been published.
HMRC’s announced implies that the review of the VAT rules has still not concluded, or perhaps it has not started. HMRC says the delay to April 2022 is “to allow it to take into account the outcome of the HM Treasury review into the VAT refund rules for central government, which will cover the future reporting requirements for GIANT customers and could lead to changes to those rules.”
The HMRC announcement adds that GIANT customers should continue to submit their VAT returns as they do now.
Meanwhile, for other VAT registered businesses the MTD sign-up and filing processes have generally gone relatively smoothly. HMRC is very pleased with the response so far from the first two stagger groups of businesses with VAT quarters ending 30 June and 31 July.
These businesses were required to submit their quarterly VAT returns under MTD by 7 August and 7 September 2019 respectively. Over one million VAT returns were submitted by the stagger 1 group, which represented an 85% compliance rate.
The area which has caused the most difficulty for tax agents is the agent services account (ASA). HMRC is not happy with the performance of the ASA, and many tax agents are frustrated with the frequent changes and dead-ends in the compliance process. There is certainly much that needs improvement with the ASA before the MTD project can be rolled out to income tax.
MTD for income tax
It is still not clear when MTD for income tax will be rolled out. The accounting and tax bodies are pushing HMRC for more consultation before MTD for income tax moves anywhere near mandation.
Speaking at the CIOT conference in September 2019, Rebecca Benneyworth suggested that the MTD entry threshold of £10,000 of turnover was unlikely to be in place for unincorporated business before 2030. However, it is possible that certain groups, such as landlords, will have a different MTD mandation threshold.
The problem is that accounting software needs to be available to businesses before MTD can be mandated but without a clear mandation date, the software providers are not willing to develop the new software products.