There are signs that something is going wrong in payment allocation and return recording in HMRC's Making Tax Digital for VAT records. There is evidence of 'glitches' on the account. It appears that the agent ASA may not reflect what is shown in the Business Tax Account and vice versa and that HMRC are not showing tax overpayments.
Business owners may wish to double-check their Business Tax Account, or if they have a tax agent to ask the tax agent to check their Agent Services Account.
The following issues were noted for two small VAT-registered businesses:
1. Missing returns: some returns do not show in the Business Tax Account
A taxpayer's Business Tax Account @ 1.12.2021 shows:
| Returns received | ||
| 2021 | 2020 | 2019 |
| no returns | ||
| 30.9.21 | 30.9.20 | |
| 30.6.21 | 30.6.20 | |
| 31.3.21 | 31.3.20 | |
| 31.12.19 | ||
As you can see, the return to 31.12.2020, which had been submitted on time, is missing.
The ASA shows the returns correctly received although it does not show the 2019 return
| Returns received | ||
| 2021 | 2020 | 2019 |
| 31.12.20 | no returns | |
| 30.9.21 | 30.9.20 | |
| 30.6.21 | 30.6.20 | |
| 31.3.21 | 31.3.20 | |
2. Missing payments
Comparing what HMRC shows as VAT paid, the Business Tax Account shows:
| Date | Payment description | You paid HMRC |
|---|---|---|
| 6 Nov | Return for the period 1 Jul to 30 Sep 2020 | £1,638.48 |
| 7 Aug | Return for the period 1 Apr to 30 Jun 2020 | £9,189.69 |
| 7 May | Return for the period 1 Jan to 31 Mar 2020 | £2,321.43 |
| 7 Feb | Return for the period 1 Oct to 31 Dec 2019 | £4,723.64 |
Again, HMRC have missed off the 31.12.2020 return and no payment is shown as being received by HMRC.
This time, the Agent Services Account shows the same result as the Business Tax Account: the 12/2020 return is still missing.
| Date | Payment description | You paid HMRC |
|---|---|---|
| 6 Nov | Return for the period 1 Jul to 30 Sep 2020 | £1,638.48 |
| 7 Aug | Return for the period 1 Apr to 30 Jun 2020 | £9,189.69 |
| 7 May | Return for the period 1 Jan to 31 Mar 2020 | £2,321.43 |
| 7 Feb | Return for the period 1 Oct to 31 Dec 2019 | £4,723.64 |
Payments and receipts for 2021 also have a problem. HMRC fails to show that there was an overpayment of £14,736.79. This was made because HMRC advised that the business's direct debit was cancelled. The business, therefore, made a manual VAT payment. HMRC also took the direct debit despite its letter.
The overpayment received is not shown on the BTA or ASA and they both show that HMRC has refunded it, though.
| Date | Payment description | You paid HMRC | HMRC paid you |
|---|---|---|---|
| 5 Nov | Return for the period 1 Jul to 30 Sep 2021 | £3,754.73 | £0 |
| 6 Sep | Refund payment from HMRC as you requested a refund on an overpayment you made | £10,000 | £0 |
| 6 Sep | Refund payment from HMRC as you requested a refund on an overpayment you made | £4,736.79 | £0 |
| 6 Aug | Return for the period 1 Apr to 30 Jun 2021 | £14,736.79 | £0 |
| 7 May | Return for the period 1 Jan to 31 Mar 2021 | £8,416.08 | £0 |
3. Fictional returns: a different taxpayer
Like the situation in 2 (above) HMRC wrote to the taxpayer to advise that a new direct debit needed to be set up. As this was just at the end of a quarter, the taxpayer made a manual VAT payment that quarter assuming that HMRC was not going to take a direct debit. HMRC still took a direct debit and so there was an overpayment of £4,352.14
It appears that to make the payment 'fit', HMRC has created a second VAT return for the quarter to 31.5.21.
The overpayment does not show as an overpayment and the return to 28.2.21 should show a payment of £4,348.30.
| Date | Payment description | You paid HMRC |
|---|---|---|
| 7.1.21 | Return for the period 28.2.21 | £4,352.14* |
| 7.1.21*** | Return for the period 31.5.21 | £4.352.14** |
| 11.1.21 | Return for the period 30.11.21 | £4,352.14 |
| 7.7.21 | Return for the period 31.5.21 | £2,467.80 |
| 7.10.21 | Return for the period 31.8.21 | £3,290.64 |
* actual VAT was £4,348.30
** fictional return added to match to overpayment received
***date paid was 14.1.21
Editorial comment
- The figures in the examples have been changed in the unlikely event that anyone can guess the identity of the relevant taxpaying businesses.
- A key problem for agents and taxpayers appears to be that HMRC is not accurately reporting actual payments received. Perhaps MTD is not set up for accidental overpayments? The old version of the Business Tax Account did show total payments received and this makes it quite easy to double-check if there are any payment errors. It seems that the only way to check that the HMRC account is correct is to do a check each quarter and then phone HMRC's helpline to check when or if repayments are being made.
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