One of the largest UK tax reforms in years is now upon us. On 1st April 1.2 million businesses above the £85k VAT threshold embarked on the start of the new VAT regime – Making Tax digital (MTD). First deadline is looming
but who will make it?
As you know all enterprises above the £85k threshold were obliged to utilise HMRC compatible 3rd party software, digitally store all records and submit the first quarterly submission by 7th August 2019.
HMRC promised MTD would simplify VAT returns and streamline the process for filing a VAT return. For HMRC it expected MTD to reduce manual errors costing HMRC around £3billion. It is not going to plan.
Turns out there has been a raft of teething problems with Making Tax Digital and we’re only a matter of days away from the first quarterly submission deadline.
HMRC announced on 11th July that ‘more than 600,000 businesses had signed up. This is a significant shortfall considering 1.2million businesses were expected to sign up. The slow uptake from businesses illustrates there is a problem with MTD. Normally, very few business owners would deliberately go against instructions from HMRC. It is evident that the much of the blame lies at the door of HMRC.
Theresa Middleton, Director of Making Tax Digital at HMRC, said: ‘During this first year we won’t be issuing filing or record keeping penalties to businesses doing their best to comply.’
HMRC is rarely lenient therefore Middleton’s comments imply a level of acceptance on HMRC’s part instead of seeking to blame those failing to complete submission under the new VAT regime. This, however, is not a ‘get out of jail free’ card for those looking for an excuse not to submit a VAT return on time. HMRC says that sanctions could be levied in cases of deliberate non-compliance.
What went wrong?
As we know, MTD was originally announced in 2015 with plenty of publicity and a massive awareness drive from HMRC, software providers, business support agencies and accountancy firms. So why is the uptake less than half?
The digitisation of tax has been plagued with issues despite massive investment from HMRC. Reading Making Tax Digital forums for accountants and for business people reveal a number of factors that caused problems. Complaints include the fact HMRC systems have gone down increasing the number of calls to HMRC helplines. Consequently, valuable time is wasted waiting in a helpline queue.
Issues also related to data inputting resulting in error messages appearing without explanation adding to the frustration. Plus information processed, confirmed as received by HMRC, then, weeks later, users being told the information was never recorded.
Seasoned experts who deal with HMRC day in, day out are equally frustrated. Agents given authority by clients to act on their behalf, are inputting data but the information bounces back or they receive HMRC codes that don’t match up with data held.
Without a doubt HMRC has run into trouble implementing MTD. The promise to streamline and simplify VAT
submissions has failed. It has been a painful admin process. Submitting a VAT return 4 times a year is a daunting prospect for many which is reflected in the short fall in VAT return sign-ups. The good news is with the right expert support and choosing tried and tested software you will meet deadlines.
Are you struggling with your VAT return?
It is never too late to call an expert. We’ve embraced digital technology since 2014 and see digital as an opportunity to help our clients thrive.
Our team of experts can help you if you are struggling to cope with MTD and your VAT returns.
Get in touch today by calling 0141 290 0262.