RSM UK's Philip Munn warns that timing your registration for the new Making Tax Digital for VAT regime must be carefully planned, to ensure that you don’t sign up too soon.
April 1 Deadline
The first and most important message is that for most organisations, Making Tax Digital affects VAT returns beginning on or after 1 April 2019. So, for example, if your organisation’s last VAT return ended 28 February and you report on a quarterly basis, the first VAT return affected by Making Tax Digital ends on 30 August 2019. You don’t need to submit a VAT return using MTD compatible software until 7 October 2019.
This means that some organisations will be entitled to submit two VAT returns using HMRC’s existing portal from 1 April 2019 even though no deferral is allowed.
Of course, the Making Tax Digital rules don’t only cover how VAT return data is sent to HMRC. Affected organisations must also keep digital records and (from next year) there must be digital links between the records and the software submitting the return data.
However, most organisations are quite rightly focused on ensuring that they have the technology capable of submitting accurate VAT return information in time for the new rules.
HMRC has recently announced that organisations can sign up to use the Making Tax Digital portal before the obligation to use the new system exists. While this is good news for those organisations whose software providers have created a compliant solution, it means that other taxpayers may inadvertently sign up earlier than required.
On a practical level, signing up earlier than necessary means that you may rush the implementation of the new system and this could affect the quality of the VAT return data submitted to HMRC. Beyond that, many businesses have established a direct debit with HMRC to settle their VAT liabilities. By signing up early, these direct debits may be cancelled, meaning that even if the VAT return data is accurate, payment may be inadvertently late.
HMRC’s guidance states that if you pay by direct debit you should not sign up to Making Tax Digital until five working days after the submission of the last VAT return before the Making Tax Digital rules apply, and you must have signed up at least 7 working days before the first MTD return.
If you pay by other methods, don’t sign up within 24 hours for submitting your last non-MTD return but you must sign up more than 72 hours before filing your first MTD VAT return.