Businesses and accountants are struggling to sign up to HMRC's new online VAT filing system, raising concerns that the systems will be unable to cope with the quarterly deadline next month.
Online VAT filing is part of the UK taxmen's delayed Making Tax Digital programme. From April, all businesses with an income above £85,000 are obliged to submit their VAT returns through software that connects to HMRC's database.
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Returns must now be done digitally, complete with digital record keeping and preservation. Most businesses will file on a quarterly basis, although smaller businesses have been filing monthly.
The Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) has flagged problems with the new system.
Tina Riches, chair of the joint CIOT and ATT Digitalisation and Agent Strategy Working Group, said the body has received a steady stream of complaints from members attempting monthly returns.
Systems have been intermittently down and consequently the number of calls to HMRC's helpline over the last few months has increased by 40 per cent, she said.
"Some members we've spoken to have reported a high percentage of cases bouncing. They've put information in and it's not been processed. Or an error message appears but it's unclear what it means and how to deal with it. So they've had to phone the VAT helpline."
The main problem appears to be a failure around matching user data from the old system to the new one, with the testing having only occurred in a short time scale.
"If there had been a fully functional pilot earlier, that might have helped. But there were a number of problems with the pilot, so a lot of agents decided they would wait until it was fully functional."
One user got in touch with The Register to complain they had been trying and failing to send their VAT return for two weeks. "Every time I try I get, 'Sorry, we are experiencing technical difficulties, please try again later'."
He added: "It's a shambles of a process – essentially business cloud software sends a CSV File of the nine-box VAT return via some bridging software to HMRC."
The Register had heard reports of a power failure two weeks ago, but HMRC said all its systems were up and running.
Last month permanent secretary at HMRC Jon Thompson said in a letter to the Treasury Select Committee (PDF) the department was aware of "a very small number of customers" who have been affected by technical issues which have affected their direct debit payment.
"In some cases the associated online VAT account has shown incorrect statements. I am sorry for any inconvenience or worry this may have caused. We have taken steps to stop this happening in future, and we are working with those customers who were impacted to correct their accounts."
A report by a House of Lords subcommittee in November recommended that HMRC defer the introduction of making tax digital for VAT by a year.
It said: "HMRC is alone in its confidence that all one million businesses will be ready for Making Tax Digital for VAT in April 2019." Online VAT has already been delayed by one year, with the income tax part of the reforms being postponed until 2020.
At the time, the report said as much as 40 per cent of affected businesses have not heard of Making Tax Digital, let alone started to prepare for a substantial change to their accounting processes.
Another issue with the new VAT system, CIOT's Riches noted, is that businesses based abroad are being sent a code in the post, which is often taking longer than 30 days to receive – by which point it has expired. "The only workaround for these users is to go back to paper filing."
An HMRC spokesman said: "We are committed to getting tax right for everybody and ensuring people can contact us quickly, easily and at their convenience.
"We have doubled the number of people taking calls since March and continue to promote our online sources of help such as GOV.UK guidance, YouTube help videos, webinars and Twitter, and have met our five minutes target for answering calls for many weeks now.
"Over 550,000 businesses have successfully joined the service and many agents have set up their agent account and signed up their clients." ®