Key Steps for MTD Second Stage Filers

In our previous piece reflecting on the aftermath of the initial MTD deadlines for ‘First Stage filers’ we also noted that the first submission experiences of ‘Second Stage’ filers should hopefully run more smoothly. 

To recap, Second Stage filers are often referred to as ‘complex’ businesses, as HMRC have determined certain features to their operations pose greater intricacy in VAT reporting than others: trusts; ‘not for profit’ organisations; local authorities; public corporations; non-established businesses; users of HMRC’s Annual Accounting Scheme; any VAT registrations mandated to make monthly Payments On Account to HMRC; and those registered in VAT groups.  The first tranche of these taxpayers – those who submit monthly VAT returns – will be making their first MTD filings on or before 7 November 2019.

Here are the key takeaways for ‘complex’ businesses enrolling in MTD for the second wave of submissions:

• If you haven’t already done so, you should start as soon as possible the process of selecting and engaging with a provider of MTD software from HMRC’s published list who will have demonstrated they can accurately map and transmit data from your accounting system(s) to HMRC’s interface.
• Once a provider has been engaged and a solution identified, carry out end-to-end sample testing to ensure everything works as it should.
• Don’t be lulled by the deceptively long deadline ending HMRC’s ‘soft landing’ period: start reviewing now how digital links can be incorporated in your accounting systems in order to provide a fully ‘hands-free’ audit trail.

To recap on the detail, HMRC accepts that the following are digital links:

• API-enabled spreadsheets;
• Automated data transfer;
• Download and upload, import and export of files in XML and CSV formats;
• Linked cells in spreadsheets;
• Emailing a spreadsheet containing digital records so the information can be imported into another software product;
• Transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to someone else who then imports that data into their software.

Remember, as stated above – HMRC does not consider the use of ‘copy and paste’ or ‘cut and paste’ methods to move information within a software program, or between programs to qualify as a digital link.  This is particularly important to note if filing on behalf of a VAT group where companies or divisions within the VAT registration use different accounting software or use it in a different way.

• Don’t assume this is only an I.T. project: involve staff in your business that are responsible for managing VAT compliance to ensure that all the fundamental elements of MTD are captured.
• Train all other compliance staff responsible for preparing and submitting VAT returns and ensure written process notes are available ahead of time so there are no surprise glitches or delays as the first filing deadline approaches.

In summary

Aim to be prepared well ahead of time, and don’t assume HMRC will apply the same leniency when your first MTD filings become due (which will be anywhere between 30 November and 7 February, depending on your VAT return filing rhythm) as they did during the summer months.  As with all aspects of tax compliance, planning ahead and being prepared is key.