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Making Tax Digital (MTD) for VAT

Making Tax Digital (MTD) for VAT

Making Tax Digital (MTD) for VAT was introduced on 1 April 2019 to help businesses get their tax right. It was introduced in a phased approach with a ‘soft landing’ period to allow businesses time to change their accounting processes to meet the new rules.

Now that the roll out of MTD is complete across the UK, HMRC have issued a note to remind taxpayers of the Penalties they will incur if they fail to comply to the internal digital links build up and submission of VAT returns.

HMRC comments on the range of penalties that non-compliant bodies will face including:

  • Up to £400 per return filed without the use of “functional compatible software” – that means software that will:
    • Record and store digital financial records
    • Provide the VAT return and information to HMRC through a digital link
    • Receive information from HMRC
  • A penalty of between £5 - £15 per day for:
    • failing to maintain digital records – that store all the details of your sales and purchases basically, along with your business information and VAT related adjustments to returns
    • not using digital links to transfer or exchange data software
  • The notes also state that “If you file a return that contains errors, you will have to pay back any VAT that you owe. We may also charge you a penalty of up to 100% of the VAT you owe.”

As an industry, the accounting profession hope for a “light touch” to be applied for businesses who are still not quite there yet in their Making VAT Digital journey due to a shortage of resources and the current economic climate. However, our advice would be to be proactive in checking the compliance of your VAT systems in this regard.

Should problems arise with HMRC then do review and look to challenge any VAT assessments and penalty calculations. The ability to negotiate penalties down and achieve suspension should always be considered, in our experience.

Across the Xeinadin Group we have locally based accountancy hubs, well versed in accounting software programs that will meet the Making VAT Digital requirements, that can help.

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