From today, an estimated half a million1 VAT registered businesses must comply with the requirements of Making Tax Digital. But the CIOT and ATT are warning businesses against making a false start with Making Tax Digital by signing up too early – the consequences of which can be hugely problematic for them and HMRC.
While 1 April 2019 is the start date for maintaining digital accounting records, it is not the deadline to sign up to Making Tax Digital.
Adrian Rudd, Chair of the joint ATT/CIOT Digitalisation and Agent Strategy Working Group, said:
“We are concerned at the misconception that in order to be compliant businesses must sign up to Making Tax Digital by the ‘deadline’ of 1 April 2019. This is wrong. While the requirement to maintain digital records applies to many businesses from 1 April, signing up to Making Tax Digital can, and in many cases should, be done at a later date.”
After a business signs up to Making Tax Digital it will no longer be able to submit VAT returns to HMRC through existing channels. Therefore, if a business which submits VAT returns on a calendar quarter basis signs up to Making Tax Digital today (1 April 2019), HMRC will expect the VAT return for the quarter ended 31 March 2019 to be submitted via Making Tax Digital software – it cannot be submitted, for example, by typing the VAT return figures into the portal. If the business has not planned for this it could have real difficulties submitting the VAT return or paying the VAT liability on time (or both), will need to work closely with HMRC to put things right, and may be at risk of penalties.
Adrian Rudd said:
“More than 70,000 businesses are now signed up to Making Tax Digital, the majority of which have done this themselves. We hope they have not jumped the gun, having misunderstood the requirements.”
HMRC have also opened up the sign-up windows for those businesses who pay by direct debit. Previously, those businesses had to sign up 15 working days before the due date for their return. That has now been reduced to seven working days.2
Adrian Rudd said:
“Getting the timing right to sign up to Making Tax Digital is vital. That is why we have prepared a detailed illustration3 of when businesses should sign up to Making Tax Digital, covering the most common VAT staggers and whether they pay by direct debit. We would encourage businesses and their agents to review this, and HMRC’s guidance on GOV.UK, before signing up.”
Notes to editors
- There are around 2.2 million VAT registered businesses in the UK. Around 1.2 million of those trade above the VAT registration threshold and so will be within the scope of MTD. Over 40 per cent of all VAT registered businesses are on ‘stagger 1’ (calendar quarters) or submit monthly returns, giving an approximation of around half a million businesses mandated from 1 April.
- See Sign up for Making Tax Digital for VAT
- The sign up illustration can be found on the CIOT website and on the ATT website.