Opinion Former Article

Guard against complacency on Making Tax Digital VAT payments

It is just a little over a week until most VAT registered businesses will be required to start complying with the requirements of Making Tax Digital and the ATT and CIOT caution businesses that HMRC’s promised ‘light touch’ on penalties does not extend to the late payment of tax.

From 1 April 2019, VAT registered businesses with turnover over the VAT threshold of £85,000 will be required to maintain digital accounting records and to file their VAT returns directly from Making Tax Digital compliant software.

Adrian Rudd, Chair of the joint ATT/CIOT Digitalisation and Agent Strategy Working Group, said:

“We encourage businesses to prioritise the timely payment of VAT, even if they are struggling to comply with Making Tax Digital.

“The Government has confirmed that where businesses are doing their best to comply it will apply a ‘light touch approach’ to late filing and record keeping penalties in the first year of Making Tax Digital. This anticipates the difficulties some people may face in trying and failing to adhere to the new demands of Making Tax Digital. The ‘light touch approach’ does not extend to late payment of VAT. Businesses must ensure that they pay the right amount of VAT at the right time even if they struggle or fail to keep their records digitally, or file their VAT returns through Making Tax Digital compliant software.”

The ATT and CIOT are also concerned that those who pay VAT by direct debit, but have problems filing their VAT returns under Making Tax Digital, may unintentionally be late paying their VAT bill. This is because the VAT Return acts as the trigger for payment to be taken from their bank account. As a result, if someone files their VAT Return late, their VAT payment will also be late.1

Adrian Rudd said:

“We urge businesses not to panic, but to seek advice. Making Tax Digital is a fundamental change to how businesses operate, and needs to be done right. There are about 2.2 million VAT registered businesses in the UK but only around 12 per cent of VAT Returns have been submitted through software, in other words how they will be required to be submitted under Making Tax Digital.”2
Notes to editors

1. Direct debit payments are taken either three working days after the payment deadline (if the return is filed on time) or three working days after the date the VAT Return is filed (if late). If a business pays late as a result of filing late, they could incur a default surcharge. An appeal may be brought on the grounds there was a reasonable excuse if the late filing was due to Making Tax Digital problems outside of their control, for example software issues or an HMRC system crash). More on penalties for late VAT Returns can be found here.

2. Statistics are available from https://www.gov.uk/government/statistics/value-added-tax-vat-annual-statistics.

3. The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 18,700 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

4. The Association of Taxation Technicians

The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible.

Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia.

The Association has over 9,000 members and Fellows together with over 5,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.

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