Covid-19: HMRC clarifies MTD for VAT deferral reporting

HMRC has issued detailed guidance in updated VAT Notice 700/22 setting out the process for deferring VAT filings by three months under Making Tax Digital

VAT deferral is available to all businesses for a three-month period until end June 2020.

An HMRC spokesperson said: ‘Returns should be made as normal although payment doesn’t have to be made.

‘If a business pays by direct debit (DD), they should cancel that so we do not collect the payment.’

This guidance is a legal adjunct to existing rules. HMRC stated: ‘Parts of the notice include rules that have the force of law under the regulations. These rules are indicated by being placed in a box. Unless otherwise indicated within the rule, all of the rules contained in this Notice have the force of law from the date the regulations have the force of law.’

Under MTD for VAT, information has to be submitted to HMRC through an application programme interface (API). While HMRC expects most businesses to use API-enabled commercial software packages to keep digital records and file VAT returns, bridging software can be used until April 2021 as a result of the fallout from the coronavirus pandemic. This was originally going to be stopped from April 2020.

It is important to note that although this HMRC VAT Notice was updated on 7 April in response to the coronavirus pandemic, the guidance is not comprehensive and has to be used alongside a host of existing support material.

HMRC stressed that this was ‘not a standalone document and should be read together with other VAT notices’.

Due to the covid-19 crisis, HMRC has also deferred the MTD for VAT mandatory requirement to report through digital links until April 2021.

This effectively means that penalties for non-digital filing will be effectively put on hold for a further 11 months.

‘HMRC will allow a period of time, the “soft landing period”, for businesses to have in place digital links between all parts of their functional compatible software. Businesses will not be required to have digital links between software programs until their first VAT return period starting on or after 1 April 2021,’ VAT Notice 700/22 stated.

During the soft landing period only, where a digital link has not been established between software programs, HMRC will allow businesses to submit data using ‘cut and paste’ or ‘copy and paste’ and will treat this as the equivalent of a ‘digital link’ for affected VAT periods.

VAT Notice 700/22: Making Tax Digital for VAT, updated by HMRC 7 April 2020

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