HMRC recently published guidance outlining the penalties for not complying with Making Tax Digital for VAT (MTDfV). A professional body has criticised the penalties as “old fashioned”. What are the points of contention and how can you avoid falling foul?
The VAT penalty system, the default surcharge, has long been criticised as outdated and, in some cases, disproportionate. With the advent of MTDfV, the opportunity was taken to modernise, and a new system will be introduced from January 2023. HMRC has recently published guidance outlining the penalties your business will face if it fails to meet the obligations under MTDfV. In summary, these are:
- Up to £400 for every return filed without using compatible software
- £5-15 for every day that records are not kept digitally within the compatible software
- £5-15 for every day that you do not use digital links to transfer data between pieces of software.
The Association of Taxation Technicians has launched a scathing attack on the penalty system, pointing out that it is based on legislation introduced over 25 years ago, and questioning why HMRC hasn’t followed the modern approach adopted with the late filing and payment penalties. It has called on the government to have a rethink. For now though, we recommend you check that you’re using compatible software and have a strict process in place for keeping records and using digital links as soon as possible. Otherwise, you could be in for a nasty shock with multiple financial penalties despite filing submissions and paying VAT on time.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.