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MTD has gone live, now what?

25th Jun 2019
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Mark Purdue explains why businesses need to consider all the implications before rushing to register for MTD and offers some pointers on how guide clients through the sign-up process.

HMRC’s Making Tax Digital (MTD) is now live but what does that actually mean for businesses caught up in MTD for VAT? What steps should you now be taking to ensure you keep on top of the MTD timeline? And what do you need to tell your business clients to help them?

For those businesses affected by MTD for VAT, there are three basic elements to consider: the need for digital record-keeping; the submission of VAT return information to HMRC via software; and encompassing all of this, when to register for MTD with HMRC.

For most VAT-registered organisations digital record-keeping kicked off on 1 April 2019. As most VAT businesses report quarterly, their effective start date is their first VAT period starting on or after 1 April. Most businesses will have come into the MTD regime on either 1 April, 1 May or 1 June 2019.

Unless otherwise exempt or deferred to later this year, these businesses should have already made their digital record-keeping decisions. This just leaves the thorny issues of when to register, and how to make the submission.

When to sign up for MTD

Despite keeping digital records as part of their compliance with the new MTD regime, businesses should not register for MTD for VAT too soon and run the risk of encountering unforeseen complications.

When clients sign up for MTD depends on whether they are monthly or quarterly filers and which period is their first mandated submission. Importantly, you should not try to sign up until your last “old style” VAT return is submitted, otherwise you may sign up for the pilot, which could force you to submit any outstanding periods via the new MTD process, adding to everyone’s workloads and potentially complicating things further.

Monthly filers

If you have clients who file VAT monthly, their first MTD submissions should already have been completed. Assuming the client is not otherwise excluded or deferred, the first MTD reporting period fell on 7 June for the period from 1-30 April.

Time will tell how these first submissions fared, but HMRC has already experienced some downtime on the new service due to IT maintenance – not ideal when it’s just launched.

If your client has missed this deadline, they need to take positive action now to rectify the situation. First, ensure any VAT owing has been paid and and then start the process of setting the client up for MTD if this has not already been done.

There are various urban myths circulating that there are no penalties or surcharges for the first year. This isn’t strictly true – there are no penalties or surcharges for business in the first year provided they “try their best” (a slightly woolly HMRC phrase) to engage with MTD. Taking positive steps now may help in any penalty or surcharge mitigation discussions later.

Quarterly filers

Depending on the client’s VAT return stagger, the first date due for submission will be either 7 August, September or October. The respective sign-up periods are 15 May to 23 June, 15 June to 23 July, or 15 July to 22 August.

These sign-up periods are given by HMRC, and must be observed by direct debit payers. However, if your client does not pay via direct debit, they can sign up 24 hours after your last “old” return has been submitted.

By now, you should have set up any “stagger one” clients for MTD, as the suggested deadline for this was 23 June. However, if you still have stagger one clients to set up, don’t panic just yet – follow the steps below as soon as possible, ensuring there are at least 72 hours between the finishing of the set-up process, and your first intended submission.

How to sign clients up for MTD

Hopefully by now, you will have created your Agent Services Account and linked it to your existing Government Gateway accounts, which is the first step needed before being able to submit MTD data to HMRC.

Remember that the sign-up for MTD for VAT is not automatic for a VAT-registered business. Either your client, or you on their behalf, must go through the process of onboarding them into MTD – it will not happen automatically.

As an accountant, once you have your Agent Services Account, the process is relatively straightforward. From HMRC’s homepage go to Featured > Making Tax Digital for VAT > For Agents, and follow the step by step guide.

Go through the process of confirming which client you are onboarding (provide the VAT registered number etc) and then within 72 hours the new MTD record will be created for the client by HMRC. Onboarding is on a client-by-client basis, and so allowing sufficient time to follow the process for all of your clients is vital.

The future of Making Tax Digital

MTD for VAT is just the beginning of the transformation of the UK’s tax regime. Like many others, I believe that other taxes will be delivered in the same way in the next few years. I believe that MTD for income tax will be mandated, and anticipate that will be in April 2021.

The Treasury’s Spring Statement confirmed it would not happen during 2020, however, having recurring confirmation of dates it won’t be will only take us so far. We now need confirmation of the date we should all be planning for.

Software developers need certainty to plan and continue investment in MTD software. Accountants need certainty to plan with clients. Why should an accountant start telling clients about changes to processes and services when there is no certainty?

For mandation to happen in April 2021, HMRC will need to have evidence from a long-running pilot in an equivalent area. If the department needs a full scope pilot (the current pilot is limited) to go live during 2020, then it has to start working with software developers throughout 2019. The future success of MTD depends on commitment from those developers.

Throughout 2019 therefore, we will start to build a picture on how realistic April 2021 would be for mandatory start to quarterly income tax reporting. And yes, we anticipate corporation tax will come online too, but the date for that is anyone’s guess at this stage.

Replies (24)

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By SteLacca
26th Jun 2019 14:59

Stuff HMRC, I say.

Deadline for signing up clients who need to file by 7 July happens to coincide with deadlines for P11D/P11D(b) submission, and so during the same processing period, not to mention ERS Returns, which will be prepared during the same period, and lest we forget, final EPS where this hasn't already been done via FPS.

Of course, we all also have clients with a 2nd POA due 31 July who will need reminders (and it's not simply a case of a block reminder - they'll need to know how much, which means we need to check if anything is already paid - which all takes time).

It's about time HMRC recognised the time and effort we put into doing their jobs and paid us appropriately.

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Replying to SteLacca:
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By SXGuy
26th Jun 2019 16:29

SteLacca wrote:

Stuff HMRC, I say.

Deadline for signing up clients who need to file by 7 July happens to coincide with deadlines for P11D/P11D(b) submission

Deadline of 7th July means the quarter is for March to May. In which case this doesn't fall in to mtd. Its for periods beginning ON or AFTER 1st April. So not really sure the issue.

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By ireallyshouldknowthisbut
26th Jun 2019 15:07

one would hope they sort out the basic functionality first before starting anything else eg:

1. Agent Direct debit set up, or HMRC will be missing a huge number of payments, and having to employ a new army of VAT collectors.
2. Address changes (the new system doesn't even give you the address of the VAT reg company, so you don't know what is being held, let along let you change it)
3. Access to the current VAT certificate

As for SA, given a tax return will still need to be filed, the business case is even worse for that than for VAT.

I would hope that once HMRC compare the tax take with MTD to before (which is after all the whole reason for this debacle - apparently) and find there is no discernable difference heads will roll. I live in hope.

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Replying to ireallyshouldknowthisbut:
Hallerud at Easter
By DJKL
26th Jun 2019 17:09

I doubt it (the heads rolling). The fact is other countries have shinier tax tech and our lot will not want to turn up to joint events with them when they only have an old banger.

The fact the old banger works (most of the time) whereas the shiny new model has teething issues will be neither here nor there- they just need to keep up with the neighbours.

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Replying to ireallyshouldknowthisbut:
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By NLB
27th Jun 2019 10:42

I agree, the functionality is appalling!

Nearly all our clients use DD but you can't setup new or change the account over when client swaps bank, changes to address, period of return etc can't be made and you loose access to VAT certificate.

Given we were 100% cloud coming into this the only thing causing us grief is the tools (or lack of) that HMRC have decided to provide which don't match the old tools. Bonkers!

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Replying to ireallyshouldknowthisbut:
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By dgilmour51
27th Jun 2019 10:51

ireallyshouldknowthisbut wrote:

one would hope they sort out the basic functionality first before starting anything else ...

ha-ha-ha ... I nearly split my sides ...
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Easy MTD VAT
By EasyMTDVAT
27th Jun 2019 10:12

What we have found time and again with our clients is that they use our software and expect it to be able to submit VAT returns without having signed up for Making Tax Digital for VAT.

How clear have HMRC made it to businesses that they or their agent must sign up for MTD for VAT before they can start submitting their VAT returns using MTD for VAT software? From our experience, not very!

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Replying to EasyMTDVAT:
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By GHarr497688
27th Jun 2019 09:11

HMRC have been dreadful throughout this who process and clearly don't care but at the same time are desperate for taxpayers to submit. I have tried to claim exemption for some and have written three letter's to VAT written enquires and after 10 weeks have no reply. I am not sure what to do next. Our clients have turnovers between £85000 and £300000 none have ever used a spreadsheet or and Accounts package and have limited computer knowledge and only have the the very basic of accounting skills running the smallest business entities and so its a big ask.

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Replying to EasyMTDVAT:
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By meadowsaw227
27th Jun 2019 10:30

What we have found is that NOT one of our clients is remotely interested in MTD, most can see little or no benefit from it and are upset about having to pay for the privilege of it.

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By Bill H
27th Jun 2019 10:49

Yes we are in for an exciting few months. No or very little VAT coming in and potentially £39 billion going to subsidise another ill thought out inefficient system!

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By seitler
27th Jun 2019 12:32

No need to bother with MTD . A client this morning filed their VAT return for the quarter ended 30th of June 2019 the old way and their turnover is well above the limit . I think it will be quite some time till HMRC physically prevent you from using the portal . Why would they? If the returns aren’t filed they suffer a substantial loss of revenue too

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Replying to seitler:
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By bendybod
27th Jun 2019 13:19

Given that it's perfectly possible for turnover to be above the threshold and yet to be exempt from MtD for various reasons, they can't prevent you from filing the old way.

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Replying to bendybod:
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By johnhemming
28th Jun 2019 09:30

In August they will be bringing in a new interface for people not directly using the API.

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Replying to bendybod:
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By 2003bluecat
28th Jun 2019 13:14

bendybod wrote:

Given that it's perfectly possible for turnover to be above the threshold and yet to be exempt from MtD for various reasons, they can't prevent you from filing the old way.

Add that to the fact that a VAT QE 30 June wouldn't fall into the mandatory MTD start date anyway.

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Replying to seitler:
By SteLacca
27th Jun 2019 14:37

Of course, the soft landing on penalties is dependent on the taxpayer trying to comply, so just because the Return is filed that doesn't mean penalties for failure to comply won't be charged.

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Replying to seitler:
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By Cathy Milligan
27th Jun 2019 17:15

Due to a holiday, I was unable to sign up my monthly VAT client in time for his April return, so it was submitted the "old way" on 3rd June and HMRC issued his refund on 10th June. The May return has just been submitted, again the old way, but with VAT to pay, just waiting to see if HMRC take the DD. Client has sucessfully moved from paper to Sage software so we are mostly there.....

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By HLB
27th Jun 2019 18:02

Just had this from one of the Team who couldn't find how to change a Vat quarter for a client using the new ASA and as the client had registered for MTD the ability to do so on the old agent account was gone. She posted a query using the Do You Need Help With This Page link in the ASA.

'Just had an email back from HMRC saying, they couldn’t help and referred me to Vat Helpline telephone number.

Rang them, stated the issue and were informed that HMRC are working on restoring the link where we can change details on the account as before and access Vat Certificate etc., but not available at the moment.

So told me to complete a Vat 484 form and post it!

So much for Digital! '

Priceless!!!!!!!!!!!!!!!!!!!!!!!!!!

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By buttercup books
28th Jun 2019 13:02

I have monthly VAT returns so I have already filed 2 x monthly VAT returns under MTD - and I haven't had the usual email acknowledgement from HMRC -

I know the April ones were successfully received, having spoken with HMRC they verbally acknowledged receipt and could read the figures back to me,

but I did not get email acknowledgements !!

I have queries this with HMRC but not received a reply yet.

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Replying to buttercup books:
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By johnhemming
28th Jun 2019 13:16

You can look up what they have on their servers using MTD software.

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Chris M
By mr. mischief
29th Jun 2019 14:59

"Sorry, we're experiencing technical difficulties."

Same old, same old, utter drivel from HMRC.

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Chris M
By mr. mischief
01st Jul 2019 09:17

"Sorry, we're experiencing technical difficulties."

It advises checking up a few minutes later, but in reality a few DAYS later the service remains utterly pants, still down.

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Chris M
By mr. mischief
01st Jul 2019 09:52

I have put my concerns over this on the written record with HMRC Agent Account Management service today as follows:

"Obviously we were all expecting this, given the totally incompetent way HMRC has run and specified this IT project from the start. I would just like to place this on the written record, though, and to reinforce the point that I am not going to waste much of my time on HMRC’s latest mucked up IT project.

Instead, I shall just:

• Use the portal, or
• Print off and post VAT returns to HMRC if necessary.

And of course totally reject any fines or penalties which come out of this. And I’ll be busy online advising all other accountants to do the same thing."

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Chris M
By mr. mischief
01st Jul 2019 11:16

For another client I already had authorised, "no VAT returns outstanding" per HMRC. Per the portal, the June return was waiting to be submitted.

So I just submitted via the portal and have kept a record of what I did and why. It's not up to me to make HMRC's stupid systems work.

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Chris M
By mr. mischief
09th Jul 2019 12:00

Yesterday's MTD rubbishy drivel from HMRC did not in the event stop me from making a successful submission. But it took an hour to figure out the problem, and it's bound to cause problems for others.

The root cause is the rubbish way HMRC implemented this, with zero proper user acceptance testing before going live.

I had an error message from MTD that the dates were not right.

The required dates were

01/04/2019
30/06/2019

The dates in my submission were:

01/04/2019
30/06/2019

Or so it seemed. It turned out that in my submission the cell had the date and time format in it, only my source spreadsheet just showed the date. So I edited the format to remove the @ sign at the end, which adds the time.

Then resubmitted and it all worked.

This is the sort of thing that proper user testing with real taxpayers would have picked up, but of course HMRC can’t be bothered with that kinda stuff.

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