Five-day turnaround time for MTD direct debits

Taxpayers need to allow five working days to set up a direct debit instruction for the new Making Tax Digital (MTD) service

HMRC has clarified the process for setting up direct debits as the first deadline for quarterly VAT payments falls this month for those registered for VAT over the £85,000 threshold.

The announcement comes after criticism of the launch of the service with taxpayers confused about how to register for the service and confusion over deadlines and filing requirements, as HMRC relies on for communications. The latest figures show that registratation levels for Making Tax Digital are relatively low.

The service has faced teething problems with direct debits with HMRC chief executive Jon Thompson called to defend both DDs and the lengthy registration process in a letter to the Treasury Committee last month.

In April the Association of Tax Technicians (ATT) warned that businesses needed to plan carefully their enrolment into the service to ensure they didn’t incur penalties if they encountered problems in making their VAT payments on time.

Last month MPs lambasted HMRC as businesses faced long waiting times on the VAT helpline and an increase in calls terminated unexpectedly after ten minutes on hold. This followed IT maintenance issues earlier in the month which prevented the filing of VAT returns for more than a day and criticism over the lack of software designed to be accessible to people with disabilities.

All VAT payers who pre-registered for the MTD for VAT service before the mandatory start date of 6 April 2019 must submit VAT returns online using software as soon as an account is activated. For those who delayed signing up, the first MTD mandatory reporting requirement will not start until July at the earliest for most customers.

Some monthly VAT payers will already be using the auto-filing system if they do not want to make payments on account and submit quarterly VAT returns, provided they have completed form VAT 484.

The threshold for MTD is £85,000, but once registered for it, businesses cannot withdraw and must continue to file their returns through MTD.

Despite the length of time that HMRC has been developing the system, there is a big awareness problem around MTD, with a large proportion of eligible businesses yet to register for the service.

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