MTD for VAT: Are you ready for bulk migration?
In a process that HMRC is referring to as bulk migration (BM), the tax department is to transfer close to one million VAT registered business from its aging legacy VAT platform on to its new MTD-ready Enterprise Tax Management Platform (ETMP).
Starting in March 2021, it is predicted that the migration process will take around six months to complete.
Who’s going to be affected
At least 700,000 of those expected to be affected are the voluntarily VAT registered, with VATable turnover under the £85,000 compulsory registration threshold.
The good news is that the over 1.4m businesses who’ve already signed up to Making Tax Digital for VAT (MTDfV) won’t need to do anything. They’ve made the move to the new platform as part of their MTDfV onboarding process
What do I need to do?
Don't worry if you’re one the 700,000, HMRC will do the hard work behind the scenes.
In fact, after you’ve been moved you will continue log on to your HMRC Business Tax Account (BTA), as before and many of you will continue to complete and file an online VAT return. You might notice the first time that some of the screens may look different but do not panic once you’ve got used to the changes everything will work as before.
So what’s the fuss about?
There are a couple of things you need to be aware of:
- The new platform will not accept XML returns
- If you wish to continue to pay by direct debit HMRC will need a current email address.
The end for XML
If you’re one of the ever-reducing die-hard population of desktop accounting software users still filing VAT returns using XML, that option will not be available after the move.
While you will not be able to file VAT returns using XML HMRC will still expect you to submit your VAT figures online.
One way to comply will be to complete and then file HMRC’s online VAT return. It can be accessed via your BTA.
As an alternative, you could upgrade your software and sign up early for MTD and join the over 300,000 voluntarily registered who are already filing MTD-compliant VAT returns.
If you pay your VAT due by direct debit, HMRC will write to advise you on what is to come and at the same time ask for a current email address. I am assured that the letter will contain clear instruction on how to supply an email address.
Failure to supply a current address will prevent HMRC from transferring your existing direct debit to their new platform. As a result, you may need to consider alternative payment methods
HMRC needs a current email address in order to notify the taxpayer of the amount that is going to be taken from their account. It is the only way that it can communicate this information within the strict timescale dictated by UK banking regs governing direct debt mandate notification periods.
What about accountants
Accountants are not going to be informed when their clients are being migrated. Although, there will be migrated in priority order, as below:
- Those with simple and up to date affairs
- Those with more complex affairs
- The de-registered and insolvent
- Very complex
- Those who make payments on account.
Agents who have not already done so will need to set up an Agent Services Account (ASA) by March 2021 and ensure that they copy across their VAT clients from their ‘old’ agent portal to their ASA (this will move the authority to act too).
Once a client’s record has been moved to ETMP all future online VAT returns will be accessible via a link within the ASA and not from the ‘old’ agent portal.
Not MTD by the back door
HMRC has promised that BM will not be an attempt to introduce MTD by the backdoor. It is merely the department taking another step toward achieving its ambition to ensure that the UK tax regime becomes one of the most digitally advanced tax administrations in the world.
- from April 2022 Making Tax Digital will apply to all VAT-registered business for their VAT obligations
- from April 2023, businesses and landlords with business income over £10,000 per annum which are liable for Income Tax will need to keep digital records and use software to update HMRC quarterly through Making Tax Digital
More recently, at the time of publishing its ‘Making Tax Digital : Corporation Tax’ consultation document HMRC made it clear that there would be no move to extend MTD to Corporation Tax prior to April 2026.
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Brian Palmer is an independent tax policy adviser, writer and observer on all things tax and you can contact him at [email protected].
Brian is the CEO of Tax Policy Advice. He has amassed considerable all-round experience of the UK tax system,...