The publicity is starting to be rolled out about MTD for Vat, which we all know is up and running from 1 April 2019.
When I say the publicity is starting to be rolled out I mean to us as accountants. As I write this in the middle of August, little or nothing has been sent out or put out directed to our clients.
I can only draw a comparison with the staggering amount of publicity that was given out about workplace pensions, which as we know is ongoing to the point where almost everyone has some inkling about workplace pensions for employees and the need for employers to do something about it.
So here we are on the cusp of a major change in the Vat reporting regime and, possibly, the accounting methods to be used by business, and yet so little publicity has been given that when you broach the subject with clients their initial reaction is one of surprise that they know nothing about the changes.
When I say the publicity is starting to be rolled out let’s be honest, it’s more a trickle than a deluge. Many accountants are still waiting for sight of the “free linking/bridging software” and only a couple of paid-for pieces are actually available at this moment in time. Will there ever be genuine “FREE linking/ bridging software”? I somehow doubt it, but time as they say will tell.
The trickle that has been put out is contained within the issue of ‘Vat Notice 700/22: Making Tax Digital for VAT’, which was issued on 13 July. Many accountants are assiduously working their way through the various scheme examples to see how they will relate to their clients. And, of course, they are trying to work out the scenarios where a “digital link” is to work, and then visualise how that will work in practice while at the same time trying to list the various clients that each scenario will apply to.
One thing we do know is how HMRC will calculate the penalties that will apply. The publication ‘Interest harmonisation and sanctions for late payment’ was published on 6 July, so no doubting HMRC’s order of importance, is there?
So what are the implications of paying your vat late? Well, pay the liability within 15 days of the due date or agree a Time to Pay initiative in the same timescale and no penalty is due. Leave paying between 15-30 days and half the penalty will be charged; after 30 days the full penalty will be charged, and a further penalty will be applied that accrues daily until the liability has been settled. Quite what the penalty rates will be has yet to be decided, so watch this space.
We know how the penalties will work, but we don’t know the rates. We actually know how to calculate and complete a Vat return for virtually every eventuality, but between now and next April we will have to work out from the nine examples provided by HMRC how we are supposed to actually file the return. With just seven months to go, is that fair? Is that sensible? Is that a disaster waiting to happen? We all know the answers to these questions, but is anyone from HMRC actually paying attention? Or are they sticking their heads in the sand and leaving it to us to find a way?
HMRC are determined to go ahead with MTD for Vat which is, of course, their prerogative. But surely, in their quietest moments, they are thinking ‘we really haven’t covered ourselves in glory on this one’. Hopefully, they will think long and hard about MTD for income tax and corporation tax in 2020.
- Tony Margaritelli Chair, ICPA
Accounting Practice Online is part of the ICPA, which is an organisation designed to provide support and guidance for accountants in practice. With 35+ practice specific benefits there has never been a better time to join. Take a look at the routes to membership today.