HMRC IT systems upgrade – what you need to know



In the fast-paced digital world we live in it is easy to forget that many large organisations – including some Government departments – are still using legacy computer systems.

Keeping up to date with the latest technologies is crucial however, especially with so much data to handle.

HMRC are the latest Government department to undergo an upgrade, with its IT capabilities moving to a new system by September 2021.

But the upgrade is set to impact businesses across the country as HMRC migrates its taxpayer accounts to the new system.

Here, Andrew Diver, Head of Taxation at Beatons Group, has a look at the switch and how it could affect your business.

Who will it affect?

If your VAT is paid through a direct debit, HMRC is required to let you know the amount owed and the payment date before the payment is made.

However, due to the short time between the submission of a VAT return and the payment of the tax, HMRC will not be able to send out postal notices to customers while it upgrades its computer systems.

Instead, HMRC will be sending out notices through customers’ email addresses.

This is where the problem lies – if a business has no email address on record with HMRC, the direct debit will be cancelled, leaving businesses at risk of paying late.

What to do

The best way to make sure your business avoids issues as HMRC switches to the new IT system is to ensure your email address is registered with them.

To do this, log into your business tax account and make sure there is an email address on record.

If there is no address registered, add it to your account as soon as possible to avoid getting caught out.

Looking to the future

A report by the Public Accounts Committee, published in January, revealed HMRC was spending too much of its budget on legacy systems and needed to increase its capability, especially in regard to cyber security.

Changes have already been made for import and exports - with the transfer from the older Customs Handling of Import and Export Freight (CHIEF) system to the new Customs Declaration Service (CDS) system.

Other changes include the introduction of Postponed Import Duty systems as a result of Brexit and the introduction of the Making Tax Digital platform for VAT.

While digital is clearly the direction of travel for HMRC, it has declared it is not a software developer.

A greater onus will be placed upon third party software providers developing systems to make the necessary submissions to HMRC.

No greater example of this can be found than the Making Tax Digital system, which has been introduced for VAT but will be extended to Sole traders, unincorporated business and landlords with income over £10,000.

From March 2023, taxpayers will have to source their own compatible software to be able to make submissions.