Making Tax Digital - application process for digital links extra time and latest agent update

Nov 11, 2019

 

HMRC has issued edition 11 of its Making Tax Digital (“MTD”) update for agents. Should you wish to receive this directly in future, email makingtaxdigital.mailbox@hmrc.gov.uk.

 

Readers are also reminded that the deferral of Making Tax Digital (“MTD”) for VAT for some taxpayers to 1 October 2019 has now ended. Guidance on when to sign up for MTD for businesses for whom a deferral was available has also been published.

 

HMRC has also now opened a process available to all businesses which allows them to apply for extra time to meet the MTD digital links requirement once the relevant one-year soft landing period ends (on either 1 April 2020 or 1 October 2020). The criteria to do is strict and is set out in section 4.2.1.3 of the updated  MTD for VAT notice 700/22.

 

This means that HMRC is likely to grant a direction in only a small number of cases. The relevant extracts from the notice are set out below and it has also been confirmed that agents can apply on behalf of clients.

 

“Criteria”

 

To be considered for a specific direction, you will need to:

 

  • make a formal application to HMRC as soon as possible for an extension and by no later than the end of your soft-landing period
  • explain why it is unachievable and not reasonable for you to have digital links in place by the MTD VAT digital links mandation date (in April 2020 or October 2020, for businesses mandated to join MTD in 2019) for example, why does commercially available software not meet the digital link requirement for your business?
  • submit details of the systems that are unable to be digitally linked (provide a current map of your existing VAT systems, highlighting the exact areas that cannot be digitally linked)
  • provide a clear explanation and timetable for when and how you will become fully MTD compliant (ordinarily no later than one year from the end of their soft-landing period)
  • state the controls you will put in place to ensure any manually transferred data is moved accurately and without error

What is unachievable and not reasonable

What is unachievable and not reasonable will depend on the individual circumstances for example where a:

  • component part of the businesses IT system is not capable of importing and exporting data from another part of the IT system and it is not possible to update or replace that non-compliant component (or supersede that part of the system) by the end of the soft landing period
  • business is in the process of updating or replacing its IT system and the planned implementation date for the new IT system is not before the end of the soft-landing period

This is not an exhaustive list.

Cost alone is not sufficient reason to issue a specific direction. You are expected to make every effort to comply with the MTD requirements by the end of the soft-landing period. A specific direction in relation to digital links is only intended to be issued in exceptional circumstances.

How to apply

You will need to:

  • understand what the obligations are for Making Tax Digital; this may mean consulting HMRC guidance (VAT Notice 700/22) or your Agent (if you have one)
  • email mtdspecificdirections@hmrc.gov.uk to request an application form, with your business name and VAT Registration number - businesses with an allocated Customer Compliance Manager (CCM) should request a form directly from their CCM
  • work with your CCM if you have one (for Large Business customers and relevant Mid-Size, Public Bodies customers) to submit all the required information with your application.
  • be aware of any issues that could delay an application ,such as, internal sign-off, delays in obtaining system process maps - see examples of system process maps

A specific officer will be allocated to review the application if it has been completed in full.

Once the above information has been submitted HMRC will:

  • formally review the information provided
  • discuss the information with respective Customer Compliance Managers, where relevant
  • ask for further information or evidence if necessary
  • issue the direction as appropriate

Where it is not considered appropriate to issue the specific direction, HMRC will let you know the reasons for their decision.

All applications will be considered on a case-by-case basis.

Businesses should ensure they progress their plans to become digitally linked while waiting for a formal response from HMRC.”

 

We are aware that some 'VAT notice of assessment of tax' letters recently sent to Making Tax Digital taxpayers were issued in error. If the business has already submitted the VAT return in question and paid the tax due/received its repayment, they can ignore this letter. According to HMRC, this issue affects a number of businesses. HMRC is investigating it and advises those affected not to take further action. A further update will be provided on the MTD service availability page.