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MTD VAT: HMRC communications confirming qualification for deferral

MTD VAT: HMRC communications confirming qualification

Taxpayers qualifying for the six month deferral for Making Tax Digital should have received confirmation from HMRC.

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In October HMRC announced, in relation to the Making Tax Digital (MTD) requirements for VAT, a six month deferral for taxpayers with more complex requirements. All taxpayers qualifying for this deferral should have received a communication, posted before Christmas, from HMRC confirming this. HMRC have suggested we advise clients who believe their business qualifies for deferral but have not received notification to contact them in the new year to seek clarification. HMRC have also confirmed that they are looking at deferral on an individual VAT registration basis, not on a corporate group basis. Groups which have a mixture of group and individual VAT registrations may therefore find that some group companies qualify for deferral but others must still comply with the 1 April 2019 commencement date.

We wrote about HMRC’s original announcement on the deferral in Tax Matters Digest of 19 October 2018. As there was some uncertainty around some of the categories of taxpayer that qualify, further guidance was expected but HMRC have instead decided to communicate directly with all affected taxpayers. The communication takes the form of a formal document to provide a derogation without which the MTD legislation will apply from 1 April, even where a taxpayer is certain it falls into one of the categories listed. If this situation applies we recommend contacting HMRC quickly to clarify the position.

Also, a point that may be overlooked by corporate groups that have more than one VAT registration, is that where there are any group companies with individual VAT registrations (that do not qualify under any of the other criteria), then these companies will not be deferred. A group may therefore find that companies within group VAT registrations are deferred until October 2019 but companies with individual VAT registrations have to comply from April. For administrative ease, the group may wish to enter its deferred businesses into the pilot from April so that all companies commence MTD filings at the same time, but it is currently not clear if this will be possible – HMRC’s published timetable is for the pilot to be opened to deferred businesses from ‘spring 2019’ but whether this will be by April is uncertain. Unless some clarity emerges on this point it would appear prudent to plan for two different commencement dates.

Linked to this issue of commencement date, HMRC have mentioned an emerging problem in the pilot around the date that taxpayers are signing up for MTD. HMRC’s portal, where taxpayers can currently submit their VAT returns manually through the ‘nine boxes’, is closed to a business as soon as it signs up to MTD. It is therefore essential that the taxpayer waits until it has submitted the final non-MTD VAT return before signing up to MTD for the next return period. HMRC are also required by law to provide banks with 15 days’ notice of a change in direct debit so taxpayers who pay this way should ensure they sign up for MTD at least 15 days before their first MTD return is due. There is therefore a very specific ‘sign-up window’ and we recommend any businesses considering signing up to the pilot plan this carefully to avoid unforeseen problems.

Please speak to your usual contact if you have any questions on the points raised above or MTD generally.

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