Some time ago the government estimated that the costs of complying with Making Tax Digital for businesses across all taxes up and down the country will total £980m, plus ongoing costs of £170m per year. Following delays to the introduction of MTD for other taxes, updated estimates suggest that this year alone more than £150m will be spent complying with the VAT element of these changes, albeit HMRC expects that these costs will be reduced by savings from the adoption of this technology.
Despite calls last year from the House of Lords’ Economic Affairs Committee for a delay to the changes for small businesses in a report which found that ‘HMRC has failed to adequately support small businesses with the introduction of Making Tax Digital' the government has insisted on pressing ahead. That makes recent news that the government has given itself an indefinite extension to comply with the new rules particularly galling.
To recap, the majority of VAT registered organisations whose turnover exceeds £85,000 must apply the new rules with effect from the first VAT return which begins on or after 1 April 2019. A small minority (estimated at 3 per cent of the total) should benefit from a six-month deferral, the so-called complex organisations.
As the practical challenges associated with these new rules become clear, there have been several important updates to HMRC’s guidance on taxpayers’ obligations under the new legislation.
This item focusses on the most recent update towards the end of last month.
In the past most VAT registered business will have used the government gateway to submit their VAT return information, but how do government departments, NHS Trusts and the Royal Household transmit additional VAT information to HMRC? They use the VAT GIANT (Government Information And NHS Trust) service.
The most recent update to HMRC’s VAT guidance confirmed that the GIANT service is not ready to be made digital just yet. HMRC has advised that this delay is required to help prepare for changes to the system which aim to improve public sector productivity.
Perhaps most frustrating for taxpayers, the government has not given itself a deadline to comply with the new rules. Instead, the guidance now simply states that if you use GIANT ‘You cannot sign up for Making Tax Digital yet. HMRC will contact you to tell you when the deadline is.’