Making Tax Digital (MTD) has been one of the biggest changes to the reporting landscape for many years. All businesses registered for VAT now need to keep their records and submit their VAT returns electronically, a huge shift for some. HMRC has now confirmed that businesses who missed the deadline for signing up won’t be penalised, as long as they file on time using the old HMRC Portal.

This confirmation was included in an email to tax agents from HMRCs MTD for Business Customer Readiness and External Stakeholder Team. It says ‘If you have clients that pay by direct debit the sign-up window has closed for the 7 August. Do not worry we won’t penalise them this time, so file the old way and come back when the DD has been collected to sign up in time to file the next return. Although we will not penalise them, they will receive a letter from us telling them that they missed the deadline and asking them to take action.’

Many agents are still waiting for confirmation of sign-up to MTD from HMRC, which have been delayed beyond the agreed 72 hours. These firms will be received to hear that their clients won’t be penalised, and given that the delay in notifications is from HMRC, it seems only fair.

Yet, once again, businesses who have abided by the rules, are worst off.

MTD and its deadlines were announced a long time ago. Despite problems with the detail available and issues around the system itself, many businesses, and accountancy firms, have spent a lot of time and effort to ensure they are able to meet the deadline. New software has been identified and set up, new users have been trained, and the registrations were made in good time. The time and money for this work was found, because there was a deadline, and it was a legal requirement, bit a choice. Every client we have spoke to about MTD would have preferred to carry on with the day job, than to be sidetracked by the changes required.

Yet now, those that haven’t put in the effort, won’t be penalised.

Don’t get us wrong, we know there are some people who have made the effort, and who have been affected by the systems issues and the delayed notifications. We also know that there are people who were forced to move away from manual records, who now love the new system they’re using.

The problem is that by announcing that there will be no penalties, this encourages some businesses to ignore future deadlines and makes the implementation of future changes more difficult for all parties.

Is HMRC taking the easier option, given that it has a quarter of its workforce seconded to work on Brexit preparations? Is it taking the easier option, rather than to admit that it shoddy ahem listened to the professional bodies who wanted a longer pilot programme? We don’t know, but whilst we would be wary of encouraging penalties, a shift away from them at such a late stage is hardly fair.

 

 

You can see more about this announcement here: https://www.accountingweb.co.uk/tax/hmrc-policy/making-tax-digital-no-penalty-for-missing-first-filing?utm_medium=email