Find the latest news below (hyperlink takes you to article):
HMRC statement on error in recently issuing ‘VAT notice of assessment of tax’ letters to some MTD customers.
On 29 October, HMRC updated its MTD service issues webpage to confirm that it had recently issued ‘VAT notice of assessment of tax’ letters to some MTD customers.
HMRC contacted the CIOT to say that if the taxpayer has already submitted the VAT return in question and paid the tax due/received its repayment, they can ignore this letter. Taxpayers can check their position using their 'HMRC online services' and agents can check this on their behalf by using the 'Manage your client’s details' service.’ HMRC apologise for any inconvenience this may have caused.
Digital links – applications for deadline extension
Under the MTD for VAT rules, for periods starting on or after 1 April 2020 (or 1 October 2020 for deferred businesses) digital links must be in place for any transfer or exchange of data between software programs, products or applications used.
However, on 17 October HMRC announced that businesses with complex or legacy IT systems can apply for additional time to put the required digital links in place, subject to meeting certain qualifying criteria. This can include updating or replacing an IT system where the planned implementation date is later than the end of the soft landing period. If a business qualifies then the additional time will be granted as a specific direction.
We would be interested in hearing of your experience if you, or your client, apply for an extension – please send any comments or feedback to technical [at] ciot.org.uk
Making Tax Digital (MTD) / Agent Services Account scheduled maintenance
Details of planned downtime and service issues for Making Tax Digital can be found on the following pages:
HMRC statement on MTD performance
Please see below a statement from HMRC on its MTD performance so far, with related statistics on sign up and submissions of VAT returns.
If members have experienced non-filing or other MTD difficulties, please let us know.
Another month and more milestones reached in the rollout of MTD for VAT.
As part of our commitment to keeping you updated on how the service is progressing and how you contribute to these results, we wanted to share the headlines of recent weeks and what is planned for the coming weeks.
As August drew to a close over a million VAT businesses had signed up to MTD and submissions for the first time exceeded the number of sign-ups. Currently there are over 1.1 million businesses signed up to the VAT service, with over 1.2 million submissions having been received.
In the period leading up to the stagger 2 filing deadline on 7 September the service performed exceptionally well in handling high volumes of traffic. Almost 170,000 VAT returns were filed in the peak week leading up to the 7 September alone, with many thousands more filed in the weeks before that.
Over 230,000 mandated stagger 2 businesses (74%) have now signed up. We will shortly be writing to the 80,000 businesses in stagger 2 who still need to sign up to remind them of their obligations and the need to take action now. This approach has delivered positive results in encouraging sign-ups from the monthly filers and the stagger 1 cohort.
The number of stagger 1 businesses signing up to the service also continues to increase. Since the 7 August deadline, our nudge letters have helped encourage a further 5% of businesses to sign up to the service. Over 80% of this mandated population is now signed up and actively using the service.
By 7 October, stagger 3 businesses are due to file their first VAT return through MTD. Currently 60% have signed up to the service. To encourage further sign-ups and in turn submissions by this date, we will be sending nudge emails to those businesses who still need to sign up.
Sign-ups remain our lead indicator for monitoring compliance with the new MTD rules, as by signing up businesses are signalling their intention to comply. We have received feedback that people would also find it useful to know what proportion of those who have signed up file their returns on time through MTD. Of the stagger 1 mandated group, 94% filed by their 7 August deadline. For the stagger 2 mandated group, 94% filed by their 7 September deadline.
We are continuing to focus our support for businesses in helping them to move to MTD and get it right. We will not unnecessarily penalise businesses who are doing their best to make the transition.
With almost 300 telephony staff dedicated to MTD, the VAT helpline continues to perform well. The wait times overall, and especially around key filing dates when demand is at its highest, have remained within the 5 minute average wait time for August and September.
For the vast majority of business and agents the service works as intended with good feedback on customer experience. However for a very small minority the experience hasn’t been as we had intended and for which we apologise. We continue to make strong progress in resolving issues as quickly as possible and we are using that learning to improve the services we offer going forward, to provide a positive customer journey for everyone.
Whilst we continue to closely monitor the service, we welcome your continued assistance in helping us understand where further improvements could be made. The success of MTD for VAT is testament to the close working relationship HMRC has with all our stakeholders.
Thank you for your continued support for Making Tax Digital.
HMRC launch new design for ASA landing page
HMRC has redesigned the ASA dashboard, which is the page you are directed to after signing in. Agents can now access the MTD sign up facility and the ‘update your client details’ services from this page. We attach screenshots below.
Agent Services Account (ASA) and Services for Agents
In order to access the new MTD services and to supply updates on behalf of clients, agents will need a new Agent Services Account (ASA). This is in effect a new Government Gateway to access the new service. Each agency will have just one account per firm, and will be able to set up staff with administrator or assistant access to the account. Many firms may already have created an ASA in order to submit Trust Registration Service returns.
A basic outline of the ASA and how to set one up can be found here. Further information on the ASA can also be found in the HMRC guidance Making Tax Digital for VAT as an agent: step by step.
HMRC have also released:
- a step by step slidepack showing how agents can set up an ASA.
- A flowchart of the information required when an agent signs a business up for MTD
When you first set up your ASA account you will be given a new set of credentials. It is very important that you keep these safe, as HMRC have said they are unable to advise agents of the credentials they were given on set up. Instead, if an agent loses their ASA credentials they will have to contact the VAT helpline, who will delete their ASA account. They will then be required to set up a new ASA account from scratch.
On 10 July 2019 HMRC informed us that the following improvements have been made to the ASA:
- You are now able to track the status of authorisation requests made in the last 30 days – this is where an agent has used the new digital authorisation route from ASA to authorise a new client.
- In response to user feedback the ‘link your clients’ step has been renamed to ‘copy your clients’. HMRC have provided a revised ASA step by step guide that reflects this change.
- HMRC have delivered new functionality that shows agents the number of client authorisations that they have copied over from HMRC online services.
HMRC’s most common MTD customer support queries
This document summarises the most common of HMRC’s customer support issues for MTD and the associated HMRC guidance, including:
- Accessing software
- Viewing data in the account
- Does MTD impact other services? eg ECSL, deregistration
HMRC glitch for some overseas businesses joining MTD
Overseas business are mandated for MTD, meaning that they must commence with keeping digital records from the first VAT period starting on 1 October 2019 or later.
HMRC have informed us that they are experiencing an issue affecting some overseas customers who have either not registered for VAT properly, or where HMRC do not hold the correct information on their system. For example, if the address held is the address of the UK based tax agent, this means that HMRC’s system will not recognise it as an overseas business for the purposes of MTD, therefore when the overseas business tries to sign up, the digital service will assume it is UK based and ask for a company registration number to check with Companies House, which cannot be provided. HMRC advise as follows:
- If the taxpayer is registered at a UK VAT agent’s address, HMRC still have a fix planned that is in work in progress status; taxpayers are advised (scroll down to near the bottom of the page) to call the VAT helpline to notify them of the issue, and they will manually fix this within 14 days.
- If the taxpayer is registered for VAT at its overseas address, during the sign up process select ‘other’ rather than limited/incorporated company etc, and this will bypass the need for a company number. HMRC’s MTD registration guidance states that the legal entity is not required for overseas businesses with no UK establishment.
Availability of the online VAT Certificate
Members have reported that once a business has signed up to MTD they no longer have access to view the online VAT certificate.
HMRC have informed us that the vast majority of taxpayers signed up (or signed up by an agent) to MTD are now able to view their VAT certificate in their Business Tax Account (HMRC online services).
The functionality for agents to access this information will be delivered in August. In the meantime they can call the VAT helpline or contact their client to request the information.
MTD - further deferral for GIANT users
On 17 June 2019 HMRC announced that for those businesses who use the GIANT service (Government Information and NHS Trust), the deferral period will be further extended. HMRC has not announced the new mandation date as yet but will write to affected taxpayers to inform them of the additional deferral period, then will write again later in the summer with further information about the revised timetable and with a formal extension. Affected taxpayers should continue to submit their VAT returns as they do now.
This further deferral is due to a potential reform to VAT refund rules for central government, with the aim of reducing administrative burdens and improving public sector productivity. The review is still underway, and HMRC will need to consider the outcome in the context of MTD for GIANT customers.
Taxpayers that do not use the GIANT service are not affected by this update; those in the current deferral group continue to be mandated for MTD for the first VAT period starting from 1 October 2019 or later.
New guidance in the MTD for VAT Notice 700/22
The VAT notice for MTD has been updated today, which includes new information/rules on:
- use of supplier statements – can be used instead of individual invoices if bearing the correct information
- petty cash transactions – for individual purchases with a VAT-inclusive value below £50, these can be batched and the entry may not exceed a VAT-inclusive value of £500 per entry
- charity fundraising events – single entry for sales and single entry for costs
Further explanation of these relaxations can be found on taxadvisermagazine.com
MTD for Welsh language speakers
MTD-compatible software is developed by third party vendors and currently there are no Welsh language options commercially available. We understand that HMRC has actively encouraged software vendors who are developing MTD software to produce Welsh language services, but so far none of the vendors who were approached have developed this offering because of the lack of customer demand. HMRC have stated that they will continue to encourage software vendors to produce this offering.
Taxpayers are able to apply for an exemption from MTD if they feel the lack of Welsh software means they cannot join MTD and HMRC will consider the application. Taxpayers or their agents can apply for an exemption by calling the general VAT enquiries line on 0300 200 3700 (0300 200 1900 is the Welsh language helpline), or writing to HM Revenue and Customs - VAT Written Enquiries Team, Portcullis House, 21 India Street, Glasgow G2 4PZ. HMRC’s guidance on MTD exemptions is available online here.
Enrolling into Making Tax Digital for VAT – timetable
When enrolling yourself or clients into MTD for VAT it is vital that you get the timing right. Once signed up, HMRC will expect all future VAT returns to be filed through MTD software – including those for current / previous periods which have not yet been submitted. Further, there are additional restrictions on the sign up periods, particularly for businesses who pay by Direct Debit.
HMRC have provided guidance on sign up dates for businesses in the deferred population (who are subject to MTD for their first accounting period beginning on or after 1 October 2019). All deferred businesses should submit their last non-MTD return and ensure any payment/repayment has been finalised before signing up to MTD.
See Making Tax Digital for VAT as an agent: step by step on GOV.UK for more information.
Making Tax Digital CIOT & ATT webinars: 21 February 2019
The CIOT and ATT held a webinar focussing on MTD for VAT on the morning of 21 February 2019. The recording and corresponding slides can be found here.
If you have any further questions please email technical [at] ciot.org.uk
Making Tax Digital – Soft landing period confirmed as 12 months for taxpayers subject to deferred mandation
HMRC has updated VAT Notice 700/22 Making Tax Digital for VAT. It now includes confirmation at section 220.127.116.11 that for taxpayers subject to delayed mandation from 1 October 2019, the digital links ‘soft landing period’ will also be 12 months, i.e. the taxpayer has until its first VAT return period starting on or after 1 October 2020 to put digital links in place.
MTD pilot for Income Tax Self-Assessment
MTD for Income Tax Self-Assessment trials entered their public beta testing phase on 15 March 2018. You can access the service here. Taxpayers are eligible for the public beta if they are a sole trader with income from one business and their current accounting period ends after 5 April 2018, and taxpayers who rent out UK property (excluding furnished holiday lettings).
To take part in the pilot, businesses will need to record their income and expenses in a MTD compliant software package, which lets them send quarterly income tax updates to HMRC. At the end of the accounting period they will need to send a final report to confirm their income and expenses for the year. If they need to claim allowances and reliefs, they can do this within that final report. They will then be able to see a tax calculation for the year in their business tax account as well as through their software. Businesses taking part in the pilot will need to agree to the terms of participation, which can be found here.
Likewise, agents that sign clients up to the pilot (including clients whose digital records are being kept by the agent and clients that keep their own digital records) will need a software package that lets them send the updates to HMRC on their clients’ behalf.
If you and your clients are already using software to keep records, you should check with your supplier when it will be ready to allow you to send MTD updates to HMRC.
The current list of MTD compatible software products is set out on gov.uk here. We understand that there are a number of other products at various stages of development and HMRC have said that they will continue to add to this page as new products become available.
Making Tax Digital – HMRC letter to deferred businesses
HMRC announced that a number of businesses who would otherwise need to comply with the requirements of Making Tax Digital from 1 April 2019 would be deferred until 1 October 2019.
More information regarding which businesses are deferred can be found below.
HMRC undertook a detailed exercise to identify all customers that fall within this group, and issued letters to every customer affected. A copy of the letter sent to these businesses is below for information.
The letter is a specific:
- direction under Regulation 25A SI 1995/2518 to continue using existing methods to file VAT returns for all periods starting before 1 October 2019 (unless businesses choose to join Making Tax Digital for VAT before then)
- notification of exemption under Regulation 32B SI 2018/261 from the requirement to keep an electronic account (digital VAT records)
Any business that has a taxable turnover of, or above, the UK registration VAT threshold (currently £85,000) and does not receive the letter below (and who does not otherwise qualify for exemption) must comply with MTD from 1 April 2019. If you think that you or your client should qualify for the deferral, but have not received one of these letters, you should contact HMRC on the VAT Helpline - 0300 200 3700.
Overview of Making Tax Digital for VAT – deferral period and timeline for pilot and mandation
HMRC announced in its policy paper that there is a deferral period of 6 months for Making Tax Digital for VAT for businesses falling into one of the following categories:
- ‘not for profit’ organisations that are not set up as a company,
- VAT divisions,
- VAT groups,
- those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts),
- local authorities,
- public corporations,
- traders based overseas,
- those required to make payments on account, and
- annual accounting scheme users.
These business will only be required to adhere to the MTD for VAT rules from 1 October 2019.
Details in respect of the deferral and the timeline can be found here.
HMRC have also produced a visual timeline of the key dates for entering the pilot and the dates that MTD for VAT goes live.
MTD Communications – HMRC letters to businesses affected by MTD for VAT
HMRC started to send out their first wave of what they are calling 'encouragement letters' to businesses within the scope of MTD for VAT in November 2018, and the process is ongoing. The letters are not copied to the businesses’ agents.
Four versions of the letter are now being used:
- Where HMRC are confident that the trader has taxable turnover above the VAT threshold, and HMRC know the software through which the returns are submitted
- Where HMRC are confident that the trader has taxable turnover above the VAT threshold, but the return is not submitted through software
- Where HMRC believe that the trader might have taxable turnover above the VAT threshold, and HMRC know the software through which the returns are submitted
- Where HMRC believe that the trader might have taxable turnover above the VAT threshold, but the return is not submitted through software
Example copies of each letter are attached.
HMRC remain committed to writing to everyone within the scope of MTD for VAT, which we understand is to be done by the end of February.
Making Tax Digital: History and timeline
On 13 July 2017 the Government announced that it would be delaying the introduction of Making Tax Digital (MTD).
In response to concerns raised by MPs, businesses and professional bodies such as the CIOT, MTD will not be mandatory until April 2019, and then only for VAT purposes. In October 2018, HMRC announced that certain businesses with more complex VAT matters would have mandation deferred for six months (details are set out further up the page). This is expected to apply to approximately 3.5% of the mandated business population.
Under the timetable:
- Only businesses over the VAT threshold (currently £85,000 of taxable supplies) will have to keep digital records.
- Digital records will only be required initially for VAT purposes, and only from April 2019 (unless the deferral period applies).
- Business will not have to keep digital records or report quarterly for other taxes (e.g. income tax and corporation tax) until April 2020 at the earliest.
- MTD will be available on a voluntary basis for businesses below the VAT threshold, and for other taxes.
The Government have stated that they will not widen the scope of MTD beyond VAT before the system has been shown to work.
The enabling primary legislation for MTD for businesses for both Income Tax and VAT is in sections 60, 61 and 62 and Schedule 14 Finance (No 2) Act 2017.
The MTD for VAT Regulations SI 2018/261 were laid before Parliament on 28 February 2018 and come into force on 1 April 2019. No significant changes were made to the Regulations from the draft regulations that were consulted on between 18 December 2017 and 9 February 2018.
We have produced a detailed chart which compares the current VAT rules with those expected under MTD for VAT. This can be found here.
HMRC will consult on MTD for Corporation Tax at some point in the future.
The remainder of the MTD pages should be read with the above in mind.