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
1. 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.
3. The sign up illustration can be found on the CIOT website at https://www.tax.org.uk/policy-and-technical/making-tax-digital#enrolling_into_MTDfV [and on the ATT website at https://www.att.org.uk/making-tax-digital#_enrolling_MTD_for_VAT].
4. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 18,700 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
The Association of Taxation Technicians
The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible.
Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.
The Association has over 9,000 members and Fellows together with over 5,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk