Making Tax Digital has started but don’t jump the gun

Question.

I am a VAT registered business and I have received correspondence from HMRC in relation to registering for Making Tax Digital. What do I need to do to be compliant and should I register immediately to Making Tax Digital?

Answer.

From last Monday, 1st April, an estimated half a million VAT registered businesses must comply with the requirements of Making Tax Digital. But businesses need to be wary 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.

Accountants and tax advisers 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.

We are aware that 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 and registered earlier than they needed to.

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.

Getting the timing right to sign up to Making Tax Digital is vital. Taking advice and understanding the impact of registering for Making Tax Digital is vital for every VAT registered business. We are actively speaking to all our clients and guiding them through this process and we would encourage all businesses and their agents to fully understand the requirements before signing up.

The advice above is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.