With just 8 weeks to go before MTD for VAT goes live the prospect of having to change VAT and filing practice is becoming more real. HMRC have been busy with 2 significant updates so far this year, as well as starting to contact all affected VAT registrations.
Starting with the practical - there are a couple of steps that you should take to ensure you are ready for MTD4VAT mandation:
- Check that you have login details for all Administrators for every registration on the HMRC portal / Government Gateway. There are 2 levels of access - Administrators and Assistants - only Administrators can link to MTD4VAT software;
- HMRC are in the process of writing to all affected VAT registered businesses advising of their mandation date (there are currently 2 versions of these letters and HMRC are monitoring which version creates the best response). You should be checking that you have letters for all registrations and that the mandation date is correct as the onus is on the taxpayer to join MTD on the correct date. However, we understand that overseas businesses handled by NETPU (Non-Established Taxable Persons Unit) have yet to be contacted.
Moving onto the more technical side, HMRC have published an update to "VAT Notice 700/22: Making Tax Digital for VAT" and expanded the MTD pilot to accommodate all non-deferred businesses as well as partnerships and VAT groups - but not divisions, registrations that make payments on account or are based overseas.
The revised 700/22 VAT notice includes some long awaited clarity on several issues but disappointingly leaves other questions unanswered. The major changes include:
- The 12 month light touch period for digital record keeping applies to the mandation date for registrations, meaning that deferred registrations now have until the end of September 2020 to fully implement digital record keeping and digital links;
- Clarity around the requirements for the VAT Account - including cash accounting, and the definition of taxable turnover to determine whether MTD applies.
However, there remain a number of outstanding issues that we continue to liaise with HMRC on:
- Non-standard periods, such as industrial quarter ends - HMRC guidance has dropped the words "standard period" from the April 1 start date, suggesting that non-standard periods are now included, but as there is no specific reference to non-standard periods we continue to press HMRC for a definitive answer but have yet to receive a response;
- We have queried HMRC's requirements for MTD VAT100 filings to include "fraud header" information. This is additional data that is aimed at identifying the person and/or machine making API requests or submitting a return ie including the IP address of the user's device. Whilst these headers are used in online banking applications, we believe there is a potential GDPR and legal issue with third parties ie MTD software suppliers, harvesting this data and passing it on to HMRC. We also believe that the data required will cause significant issues for corporate IT / InfoSec policies;
- It is still not possible within the MTD API to match payments against returns, making the use of this API questionable;
- The Business Tax Account portal appears to be changing on a regular basis, with data appearing and disappearing and not necessarily matching that data we request from the APIs. Again we have raised our concerns with HMRC on this as it does not provide confidence that the new platform is as robust as it should be.
The deferral for complex registrations means that many organisations will have to manage dual filing methods with some registrations falling under MTD from April and some remaining on the existing system until October.
HMRC have already been "surprised" that a number of VAT returns have been filed using the "old portal" after signing up to MTD and the new filing system - this is causing several problems including the ability to view details of submitted VAT returns and liabilities. The obvious answer would be for HMRC to close the portal to MTD registered businesses, but so far the only action seems to be an on screen "warning" asking taxpayers already signed up got MTD to use the relevant software.
To avoid any confusion about the correct filing method it is more important than ever to implement a solution that supports both platforms and can address your VAT requirements both now and in the future. VAT Controller addresses this and in conjunction with our many years of experience in the VAT automation space, we can assist you with your project to address MTD, whatever stage of the process you are.
If you would like to know more about how VAT Controller can support your move to MTD, please contact Bryony Clinton on 0118 935 7140 or email bryony.clinton@taxautomation.co.uk or visit our VAT Controller website at www.vatcontroller.co.uk