HMRC reaches Making Tax Digital for VAT implementation milestone

22 August 2019

Hands typing at a keyboard

On 7 August 2019 HMRC reached a significant milestone in the rollout of Making Tax Digital (MTD) with the first quarterly filing deadline for VAT. 

HMRC has been encouraged by the number of businesses that have signed up and submitted their VAT returns through MTD. There are now nearly one million businesses in the service who have made over 900,000 VAT submissions. As at 7 August 370,000 (76%) VAT registered businesses above the threshold in stagger 1 had signed up. This is in line with HMRC expectations, particularly given the public commitment that HMRC had made up front to taking a light touch approach to digital record keeping and filing penalties during the first year.

The focus during this period has been to support businesses moving to MTD to get it right and not to unnecessarily penalise businesses who are doing their best to make the transition.

HMRC is now writing to the businesses who did not sign up to encourage them to join as soon as possible and expect numbers to increase significantly in the coming weeks as a result. HMRC took this approach with monthly filers, whose first return through MTD was due by 7 June and 89% (40,000) of that group have now joined the service.

Non-mandated customers are joining on a voluntary basis and sign-ups from businesses in stagger 2 (179,000) and stagger 3 (124,000) are accelerating in advance of their first submission deadlines on 7 September and 7 October respectively.

In the period leading up to the stagger 1 filing deadline on 7 August the service performed well, handling high volumes of traffic. Over 60,000 submissions were filed per day at peak times and 19 businesses even filed their returns in the minute before midnight.

Businesses and agents rose to the challenge. HMRC is aware that many had invested significant amounts of time and effort to prepare for MTD and get into a position where they felt comfortable submitting their first returns. HMRC thanks all those who worked hard to make this a smooth transition for the majority of businesses.

Those who have now switched to digital record keeping and signed up and submitted their first return have taken the biggest step in the MTD for VAT journey. Once businesses are set up and get used to the new way of doing things, they will be better placed to take full advantage of the benefits that the move to digital brings.

Mindful that the VAT helpline is very important for customers, HMRC provided additional helpline staff in late July in anticipation of a peak in demand in advance of the 7 August deadline, which helped to deliver an average wait of five minutes. The helpline achieved an average wait time of less than five minutes for the whole month of June and for most of July, with the exception of two weeks in July (commencing 1 and 29 July in the build-up to peak weeks) when average wait times rose to around seven minutes before returning to normal levels.

HMRC is pleased with progress but acknowledges that a small proportion of customers experienced issues when trying to meet their obligations. It apologises for the frustration and worry this may have caused. HMRC will continue to improve the service so that in future every customer is able to experience the smooth process that was enjoyed by the majority. Over the coming return deadlines HMRC will continue to monitor progress in the rollout of the VAT service and take stock of the lessons learned when considering the future direction of MTD.