MTD: Changes to HMRC guidance and procedure

Business transformation
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As we approach the go-live date for MTD for VAT, there has been an acceleration in new or revised HMRC guidance and procedures – three developments have emerged in the last month and there are more in the pipeline. 

As has been expected, on 18 January HMRC released a revised version of VAT Notice 700/22:Making Tax Digital for VAT, which corrects errors included in the original version.

It also contains a clarification of the soft landing period and examples of when the MTD rules start to apply for different businesses. HMRC has also altered the conditions for applying for the ASA.

Testing the turnover

The original version of VAT notice 700/22 implied that if the taxable turnover of the business had ever exceeded the VAT registration threshold, the business was required to enter the MTD regime from April 2019. This is not correct, as only the turnover for the 12 months ending immediately before the date of the turnover test should be considered.

The revised VAT notice 700/22 makes it clear that the MTD for VAT rules only apply from 1 April 2019, so 31 March 2019 is the earliest date on which the annual turnover level can be tested.

Notice 700/22 provides three examples of businesses with different start dates for MTD, which I’ve summarised as:

  • A Ltd is VAT registered with turnover above £85,000 and a VAT period that runs from 1 March to 31 May. A Ltd must comply with MTD for VAT from 1 June 2019.
  • B Ltd registers for VAT from 1 September 2019 as its taxable turnover for the 12 months to 31 July has exceeded £85,000. B Ltd must comply with MTD from 1 September 2019.
  • C Ltd has voluntarily registered for VAT, but its annual taxable turnover does not exceed £85,000 until November 2019. C Ltd must comply with MTD from its next VAT period which begins on or after 1 December 2019.

Note the difference between the time B Ltd and C Ltd have to prepare for MTD. As B was not previously VAT registered it has an extra month to inform HMRC and register for VAT. Depending on exactly when C’s VAT period starts, it may have a longer or shorter time to prepare for MTD filing.

Soft landing

HMRC refers to the period in which the rules for digital links won’t be enforced by the imposition of penalties as the “soft landing” (section 3.2.1.1 VAT Notice 700/22). This soft landing has the force of law – it is not due to the application of an HMRC concession.

For most businesses the soft landing period will run from 1 April 2019 to 31 March 2020. However, if the business has been directed by HMRC’s letter that it has a deferred start date for MTD filing to the first VAT period beginning on or after 1 October 2019, the soft-landing for that business will run from 1 October 2019 to 30 September 2020.

Note the soft landing only applies to waiving the conditions for digital links between software products within the accounting system. It does not apply to penalties which may be applied for not complying with the requirement to file the VAT return using MTD-compatible software. 

Exemptions from MTD

The text referring to other exemptions from MTD (section 2.2 VAT notice 700/22) has been changed very slightly. Referring to the grounds for exemption listed the Notice says “These may apply even if you are not currently exempt from online filing for VAT.”

This is a departure from the previous HMRC position, as it acknowledges that a person may not be able to meet all the MTD requirements even if the business (or its agent) currently manages to submit the VAT return online. 

During HMRC’s MTD webinar on 22 January, the presenter promised that further guidance regarding applying for an exemption from MTD would be issued by the end of this month.

ASA sign-up

In August 2018 John Stokdyk outlined the procedure for setting up an Agent Services Account (ASA), but in December 2018 HMRC added a new set of data to be provided before you can get an ASA for your firm.

In addition to the details of the firm’s UTR number, you must now enter the details of your firm’s money laundering supervisory body, your firm’s membership number with that body, and the date on which your money laundering supervision expires.

Most accountants and tax advisers will be supervised for the anti-money laundering regulations by their professional body. Accountants who are not supervised by a professional body should be registered directly with HMRC for money laundering supervision.

This is unlikely to be the end of the changes to the MTD procedures, and to the ASA in particular. We will keep you informed as further changes come to light.

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

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25th Jan 2019 14:12

What is it now...68 days to go?
Oh no, that's Brexit: another HMG almighty [***] up.

Why would anyone sign up for this MTD garbage (that's an Americanism y'all) at the moment?

Madness

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25th Jan 2019 14:16

Rebecca - Just to remind you. HMRC promised details of the exemption application procedure by the end of November...........then December - now January. There are obvious jokes about HMRC meeting or not meeting its own deadlines but I will pass on them for now.

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to John Stone
25th Jan 2019 17:38

The speakers on the HMRC webinar this week were saying that they are not expecting many more taxpayers to be exempted for age, disability and remoteness. They even said if a taxpayer can use the old portal they can cope with MTD for VAT.

HMRC have stopped being warm and cuddly regarding MTD.

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By Tornado
to david.bransbury
25th Jan 2019 22:07

'HMRC have stopped being warm and cuddly regarding MTD'

Yes indeed. The realisation that it will not work is making them nervously aggressive.

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to Tornado
26th Jan 2019 12:51

Precisely MTD for VAT cannot be ignored due it is not happening or that HMRC will be kind and gentle to those that don't follow the rules.

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to John Stone
25th Jan 2019 18:02

MTDforVAT means MTDforVAT.

Like Brexit, a disorganised cluster.... waiting to happen

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25th Jan 2019 16:13

No promised letters - No promised exemption guidance - No reply to my emails - Helpline not answered - No concise guidance to the new system. No joke for me .

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26th Jan 2019 12:47

Quite simply the worst systems implementation I have seen in my 30 year career.

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to mr. mischief
26th Jan 2019 16:22

and mine in 40 years !

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to GHarr497688
28th Jan 2019 11:11

and mine in 54. Come on there has to be a 60 out there.

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to johnjenkins
28th Jan 2019 15:19

Sorry - only 43 !

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By Tornado
to The Accountant
28th Jan 2019 15:35

47 and counting. There might be worse to come though.

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28th Jan 2019 10:12

"Referring to the grounds for exemption listed the Notice says “These may apply even if you are not currently exempt from online filing for VAT.”"

So does this mean my 70+ year old client with commercial lettings and over the VAT threshold, who keeps all of his records in a big handwritten book and does not own a computer will now be able to claim exemption, rather than dumping all of this in my lap?

It would be really great to know now and not in April!

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to Homeworker
28th Jan 2019 11:16

I presume that if you're doing it for him now that will set a precedent. You've got to try for exemption then you will know.

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to johnjenkins
28th Jan 2019 18:04

johnjenkins wrote:

I presume that if you're doing it for him now that will set a precedent. You've got to try for exemption then you will know.


Yes, but how do we apply... and surely me doing everything for him does not comply with the legislation (though I suspect this is the inevitable solution for many clients!)?
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to Homeworker
29th Jan 2019 09:58

I presume you do everything for him now, so what's the difference. Is it that you don't want to get involved in MTD?
I took the view that the clients we do everything for now we will continue to do so and other clients that don't have software we have put onto VT. Although I love spreadsheets we have purposely steered away from them with MTD.
Like Tornado I'm still of the opinion that MTD will not become compulsory on 1/4/19.

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By raju m
28th Jan 2019 10:36

HMRC have not got a clue about how it is going to work. But, their bosses and politicians are too proud to admit it and give up. Instead they will blame businesses and clobber them with penalties in future.

Raju

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By Tornado
to raju m
28th Jan 2019 22:21

"Instead they will blame businesses and clobber them with penalties in future."

It is one thing to impose penalties, but a completely different matter to make people pay. There is also the appeal process to pursue in the meantime.

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28th Jan 2019 10:50

Can anyone define taxable turnover for me? For instance, a current VAT registered business had a VAT exclusive turnover of £75K in the preceding 12 months but its VAT inclusive turnover is £90K. Would that make a business exempt from MTD?

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to Malcolm McFarlin
28th Jan 2019 11:13

No

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to Malcolm McFarlin
28th Jan 2019 11:18

Malcolm McFarlin wrote:

Can anyone define taxable turnover for me? For instance, a current VAT registered business had a VAT exclusive turnover of £75K in the preceding 12 months but its VAT inclusive turnover is £90K. Would that make a business exempt from MTD?


Taxable turnover means exclusive of VAT, so that would be exempt.
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28th Jan 2019 11:14

ASA (or as it should be known, [***]) is a complete waste of time.

I already have an HMRC agent account- why did they come up with this stupid idea of an ASA ([***]).

Coupled to which it just doesn't function and you can't even see who has signed up without looking at your MTD compliant software. You tell it to transfer all your clients. Next time you log in, nothing there. What is the point of it???

And I can count on one finger the number of clients who have their own tax account with HMRC- as not a single one of them are even remotely interested, as they see NO benefit at all.

When are HMRC going to realise taxpayers don't want yet more rubbish to deal with, it's why they appoint us so they can concentrate on running their businesses!

My post January time will now be spent explaining to people who have ZERO interest all about MTD and why they now have to use MTD compliant software despite managing perfectly well without any for many years- oh and it will cost them money and time and my fees will also be going up as well as one off costs of explaining all these completely useless additions which won't help them make any money.

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28th Jan 2019 11:28

Hopefully HMRC are not as bad with MTD as the ICO was with GDPR.

The last version of the ICO guide for GDPR I downloaded was version number 229 in august 2018.

Just like Brexit, MTD is an implementation shambles.

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28th Jan 2019 12:28

Yikes -already a division on the meaning of taxable turnover. Any more thoughts?

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By itp3e
28th Jan 2019 12:29

@/memyself-eye

..." almighty [***] up...."

Having lived a virginally sheltered existence I have never come across a three letter expletive ...can you elucidate please? is it perchance ...... [MTD] ??

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By Tornado
to itp3e
28th Jan 2019 12:34

Client - Your bill is too large
Me - MTD Off

It sort of works

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By JFair
28th Jan 2019 12:40

The clarification and re-issue of the VAT notice regarding the “ever exceeded” VAT threshold does not surprise me at all, but it makes me very angry.
I called HMRC VAT helpline on this very topic on 14 Jan, just 4 days prior to the update, regarding my client who’s VAT turnover has dropped below registration level in just last 12 months to 31 Dec 2018, and will be even less for 12 months to 31 March 2019, but who wishes to remain voluntarily VAT registered (he is a claimer). I was categorically told he will still have to be included in MTD VAT filing, I explained I was reading it that quite possibly he was outside the rule and wanted to be certain, but the agent was emphatic he had to be in MTD for VAT after 1 April 2019.
I’m an agent for only a handful of SE clients (work semi-part-time) and by the 1 April 2019 will only have one VAT registered limited company, I’m a pretty low earner less then £10k. So was already getting extremely stressed about the whole MTD VAT process. I made that call fully expecting I might not need to worry about this, but as a result of the helpline I then signed up with SAGE so I could start the process. That was an expense I could have done without, and now to find I did not need to have made that commitment.
Further-more to then find I need a whole new agent account, which I got half way through only to find I needed the MLR registration details before I could complete, which I then had to sign up for costing me £230! Only to now find out this might take months to come through. The whole thing will have cost me about £500.
To now find I probably did not need to do anything at all for this one client until MTD for Corporation Tax finally arrives makes me furious. I don’t mind the new digital challenges (even at 65 and in process of winding down towards retirement) and even the cost of investment, provided it is totally necessary! But now it seems to me I’ve probably done all of this unnecessarily, what a waste of my time and finances through others incompetence.

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to JFair
28th Jan 2019 12:55

Welcome to our world.

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By Tornado
to JFair
28th Jan 2019 13:00

My thanks go to you and the others that have tried to embrace MTD for VAT but been knocked back regularly by a system that is not yet fit for purpose.

I have done my bit in the past, so I have nothing to feel guilty about, but I am now a 'waiter'. I wait until everything is working correctly before joining in, and that point has not yet arrived. That does not mean that I do not have plans for myself and my clients, I do, but they will be implemented if and when the system is ready.

I am still 100% sure that MTD for VAT will not be mandatory from 1st April 2019 ..... HMRC simply will not be ready.

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By JFair
to Tornado
28th Jan 2019 13:09

Thank you all for comments, I think I shall either become a waiter like Tornado - or maybe give it all up and become a waiter in local cafe! Oh for a simple life eh!
What would we do without accounting web to have a rant - we'd all think we'd gone mad.

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to Tornado
28th Jan 2019 13:19

I know quite a few people and yet not one has said to me "this VAT for MTD is working". Most can't get registered. Is there anyone out there that is fully up and running with VAT for MTD and has no problems?

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to johnjenkins
28th Jan 2019 14:23

I am personally fully up and running with MTD and have no problems for two VAT numbers (one for a Ltd Company and the other for a Partnership). I also dealt with a monthly submitter this morning who is fully up and running with MTD and said "I am very happy with the process" and they also have no problems. (I do know of others as well).

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to johnhemming
28th Jan 2019 15:44

As the Hol said to HMRC you seem to be alone with your confidence, also I note you seem to be looking for business using Aweb. I am sure you mean well.....

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to nodrogbir
28th Jan 2019 15:48

It isn't so much confidence as experience.

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to nodrogbir
28th Jan 2019 18:46

Yes, funny how the only one who loves MTD and has no problems whatsoever using it compared to almost everyone else who does, is touting for business.

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to lincolnartist
28th Jan 2019 19:28

I am not sure that people who are using MTD are having problems. There are some problems with some of the cloud providers not doing the VAT accounting correctly for all of the special schemes. However, what I encounter are people who are not using MTD complaining about it.

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to johnhemming
28th Jan 2019 22:01

if yo look at my post I have done my utmost to explain the problems. I have joined the pilot and also filed my own VAT with the new system. My conclusion is the same as many on this site and that is that MTD is the worst intervention that HMRC have ever come up with. All that MTD is doing of any good is lining the pockets of software providers.

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By Tornado
to GHarr497688
28th Jan 2019 22:30

"All that MTD is doing of any good is lining the pockets of software providers."

This was obvious right from the beginning but it has backfired a bit with spreadsheets, (apparently used by more people than HMRC expected) being accepted as Digital Records.

It all stinks a bit.

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to Tornado
28th Jan 2019 23:00

do you know where I can buy a reformatted spread sheet.
Not at all what MTD is about.

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to GHarr497688
29th Jan 2019 06:54

What do you mean by "a reformatted spreadsheet". Excel is Excel. Open Office is available on the net.
https://www.openoffice.org/
Libre office is similar and also free available here:
https://www.libreoffice.org/
Apple Numbers and Google Sheets are on the cloud.

The Bridging providers do things in slightly different ways. Some put code into Excel to submit directly from Excel (although they still have to use a web interface to do OAuth). I use a web page to upload from a spreadsheet and then submit from the web page (I do this to make things easier to make sure they are right and deal with a wider range of inputs - different spreadsheets, CSV files etc). I think some other bridging providers also use this route, but I have not tried out their products.

HMRC provide a list of providers
https://www.gov.uk/guidance/software-for-sending-income-tax-updates

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to johnhemming
29th Jan 2019 15:21

we dont used excel spreadsheets for whatever reason and so wondered if their was a pre formed VAT record to buy

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to nodrogbir
29th Jan 2019 15:54

You can use Open Office which is free if you want.

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By Echo761
to nodrogbir
01st Feb 2019 11:43
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to Echo761
04th Feb 2019 13:14

So true.

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29th Jan 2019 09:45

Good luck anyone using excel when HMRC require full transaction details.

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29th Jan 2019 12:10

I simply cannot be bothered with this, so I am retiring earlier than I would normally retire.

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to ColinNibbs
29th Jan 2019 12:53

How many times have you normally retired before, Colin?

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08th Feb 2019 17:38

I am just a small bookkeeper Agent and really so confused with all this. I have only 1 VAT client, so now have to go out and get software so I can submit digitally, financially when a small agent it hits hard. I still have no idea what software to use. I currently use a stand alone Sage 50 software that is years old, everything I have looked at just seems so time consuming, so any suggestions on a good multi company bookkeeping software that is not too expensive would be welcome. Also my VAT client has not received any notifications at all from HMRC. I still have not set up my new Agents Services Account just tried again and its down with maintenance services.? And what is this new addition that I now also have to sign up for Money Laundering Supervision and pay the crazy fees to HMRC. I am starting to think it is not worthwhile to carry on my small little business as I cannot pass all these costs on over the few clients I have.

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