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News added on 27.06.2019

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Penalty warning for early MTD joiners

There’s still plenty of time to register for Making Tax Digital for VAT (MTDfV). In fact, tax experts are warning those who have already signed up that they are at greater risk of penalties. What’s the full story?

There’s still plenty of time to register for Making Tax Digital for VAT (MTDfV). In fact, tax experts are warning those who have already signed up that they are at greater risk of penalties. What’s the full story?

MTD applies. In April 2019 we told you about the time limit for signing up to Making Tax Digital for VAT (MTDfV) if it applies to you. it depends on when your VAT return periods end and whether your start date has been deferred to 1 October 2019. Even businesses which have been required to keep records digitally since the start of MTDfV, i.e. 1 April 2019, have until late July 2019 to register. In fact, according to some tax experts, there’s a possible disadvantage to signing up before you need to.

MTD penalties. There are broadly two types of penalty which apply once you’re in MTDfV. Those for not having proper digital links between all your business records and those for failing to submit your VAT figures to HMRC using the MTD system. HMRC’s official line is not to impose penalties for a failure to keep proper digital links for at least a year. Conversely, there’s no official leeway if you fail to submit VAT figures using the correct system. However, an HMRC spokesperson has said it will use a soft touch when considering penalties.

What’s the problem? After you’ve registered, your next return must be submitted using the MTDfV system even if it includes a period when you weren’t required to keep digital records. For example, if your next VAT quarter ends on 31 May and before submitting that return you register on 1 June, you must submit your March-April-May figures using the MTDfV system even though it didn’t apply to those months.

Tip. The ideal time for registering for MTDfV is soon after you have submitted your last return using the old system. In our example, the best time to register would be after the VAT return for the quarter ended 31 May has been submitted.

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