Transformation of HMRC’s VAT services

Businesses with turnover over the VAT threshold were required to register and report via MTD from April 2019 although those voluntarily registered could also sign up. Any VAT businesses with taxable turnover above £85,000 who have not yet signed up to MTD must do so now or they may be charged a penalty.

Further guidance on penalties is available here

As announced, all voluntarily VAT registered businesses must start to submit their VAT returns using MTD compatible software from April 2020. At present, there are three ways for such businesses submitting their VAT100 details – via MTD software, via non-MTD compatible software, by logging into and submitting the figures directly.

Currently, HMRC operates two systems – their VAT mainframe (VMF) system and the new MTD system called the Enterprise Tax Management Platform (ETMP).

HMRC has announced that from March 2021 (one year before mandating) they intend to migrate all their remaining VAT customers from VMF on to ETMP. This migration will stop the dual running of VAT across the two systems and allow for the decommissioning of the VAT mainframe which is expensive to run and maintain.

Customers who have already signed up to Making Tax Digital (MTD) are not affected by this change and do not need to take any action, as their records are already stored on ETMP. A business should continue to file their VAT returns through its Business Tax Account as normal.

Further information on Business Tax Account is available here.

Some VAT businesses and their agents will need to act before 28 February 2021 in preparation for migration. 

For Direct Debit payments to continue after migration, HMRC will need a valid and current email address for customers. This allows HMRC to comply with UK banking regulations requiring them to notify customers of the date and amount to be taken by Direct Debit (we have chosen to do this by email). 

HMRC will therefore request affected customers to provide this information, ideally via their Business Tax Account. This will reduce calls to the VAT helpline and minimise call waiting times for customers. Without a valid email address, HMRC may be unable to collect VAT payments.

Selecting MTD software and signing up to MTD now avoids the need to carry out the actions above and may save businesses considerable time and effort as we approach April 2022 deadline. However, it should be noted that it will not become compulsory to use MTD compatible software until the mandatory date.

Further information on signing up to MTD is available here

Following migration to ETMP, agents will be unable to use the agent online service for their VAT clients who are not yet signed up to MTD VAT. Instead, they must file their client's VAT returns through the Agent Service Account (ASA), using the existing link within the ASA (‘Your Client’s VAT details’, ‘Submit VAT return’), to submit returns on behalf of a client. 

Agents who have not already done so must therefore create an ASA and copy across all their VAT customers to it. This can be done here.

This means that from March 2021 agents will need to file their client's VAT returns who are not yet signed up to MTD for VAT in one of two ways, depending on whether they have been migrated to ETMP or not. 

Agents will need to check using one of the two following methods:

1. through agent online services for clients who have not yet been migrated, or 

2. through an ASA for clients who have been migrated

If you can’t file, use method 2.

Covid-19 updates

This month there has been a huge array of information from HMRC, much of which is linked to the assistance for individuals and businesses who are being affected by the Coronavirus pandemic. The main details can be found on our Covid-19 hub.

But a summary can be found below:

Job Support Scheme

The furlough scheme ends on 31 October 2020 and is being replaced by the Job Support Scheme. There are two sections to the scheme - the closed scheme and the open scheme. 

The closed scheme is available to those businesses that must close due to Tier 3 restrictions. The Government will pay 2/3 of wages via the scheme (capped at £2083.33 per month). If the closure is short-term then businesses will be able to move into the open scheme. Grants of up to £3000 per month are also available.

From 1 November 2020, for those businesses that are still open and operating, albeit, under reduced circumstances, the government will support a large portion of non-worked hours. The individual has to work at least 20% of their normal hours, and the non-worked hours are split in three parts for payment: the employer pays 5% of the non-worked hours, the government pays a further 61.67% and the individual covers the remaining one-third which is therefore unpaid. Support from the Government is capped at £1,542.75 per month per individual.

The Government has also made available grants of up to £2100 per month (depending on the rateable value of the business premises).

Test and Trace grants

Individuals who have been contacted and told to isolate under Test and Trace can apply for a grant of up to £500 provided they are either on one of a list of benefits or if not can satisfy other conditions (low earners etc). Anyone who wishes to apply can do so via their local authority.

Time to pay

For those individuals who have applied (or need to apply) for time to pay a self-assessment tax bill, the limit for this has been raised to £30,000 due in monthly instalments over 12 months. To have their application agreed upon, individuals must have:

  • No outstanding tax returns
  • No other tax debts
  • Tax owing between £32 and £30,000

The application must be made no later than 60 days after the date the tax is due (e.g. 60 days after 31 January 2021). Applications may be made online

If the debt is more than £30,000 then it may be possible to extend the deadline to pay over 24 months, but this will need to be applied for over the phone with an HMRC representative.

Returning company cars due to CV-19 issues

If an employee has a company car which counts as an employment benefit, but has not been working due to the pandemic but has been unable to return the car, then a return of the keys so that the car cannot be driven will be evidence that no benefit is being received until arrangements can be made for the car itself to be returned.

Working from home

Employed individuals may receive funds from their employer to enable them to work from home. The amount (£6 per week) tax-free. If employees have not been paid the allowance then they can claim this back via their personal tax account and receive either a refund of £1.20 per week (£2.40 if the individual pays tax at the higher rate) or an adjustment to their tax code. The allowance also applies to those who are working from home for part of the week travelling to work for the remaining part of the week (full details can be found in the Employer’s bulletin Number 86 below). 

Companies House

Companies House has issued an online system if individuals need to appeal against a fine for late submission of company returns. Evidence must be produced as to the reason for the late filing (in hospital, flood or fire damage, etc) and can be accessed here.

Employers’ Bulletin Issue 86

Released this month the bulletin contains information on the latest Covid-19 situation with the Coronavirus Job Retention Scheme, the new (from 1 November 2020) job Support Scheme, and the Job retention Bonus.

Also, some of the items covered are:

  • Deferred July 2020 Self-Assessment Payment on Account - HMRC has identified that some Self-Assessment customers, who chose to defer payment of their July 2020 Payment on account due to COVID-19, may receive a Self-Assessment statement, showing that payment is due and interest is accruing. HMRC can confirm that we will not impose any late payment interest or penalties on the deferred July 2020 Payment on Account, provided it is paid in full by 31 January 2021. Any customers who may have difficulty in making their payment can access support on GOV.UK. 
  • Student Loan thresholds – from 1 April 2-021 the thresholds for paying back a student loan rises to £19.895 for Plan 1, and £27,295 for Plan 2. Postgraduate remains at £21000.
  • There will be a new Scottish Loan repayment scheme (Plan 4) with a starting threshold of £25000
  • Employers Allowance: there is now a link from the Business Tax Account to enable employers to see the status of any EA being claimed

Download the full employer bulletin.