VAT honesty declaration trial

This is an experiment by HMRC to test whether digital prompts would encourage traders to review their VAT returns for errors before submission. The first stage of the trial has just finished, but it will be repeated so you may be affected.

In September 2018 HMRC selected a random group of VAT registered traders. For 50% of that group a new box was added to the VAT return submitted through the HMRC portal. That check box said “I can confirm that I have checked that the calculations used to produce these figures are honest and accurate.” It was not possible to continue with filing the VAT return until this box was ticked.

Members of Accounting WEB noticed that some of their clients’ VAT returns had this box, but other clients’ returns did not. HMRC responded to a query on the Agents’ Forum confirming that the honest declaration box carries no weight in law, and that completion of the honest box would not be taken into account for compliance purposes during the trial.

HMRC has found that an additional £235m of VAT was declared by the traders who were prompted to review the return by the honesty box, compared to the 50% control group who did not see the box. However, the effectiveness of the honesty box prompt diminished over time, so by the third and fourth times the trader saw the honesty prompt message there was no tax effect at all.

HMRC say they will now introduce the honesty box declaration for the 50% of the group who did not see that box for the first year of the trial.

It is not clear how this will be done with MTD filing. Under MTD the software would have to reflect the new honesty box back to the trader, which requires a manual intervention – the opposite of what MTD was set up to do, ie eliminate manual interventions!

Written by the Tax Advice Network