While hundreds of thousands of VAT-registered businesses have successfully filed their VAT returns via the new Making Tax Digital for VAT system since 1st April 2019, it’s important they are mindful of the fact that HM Revenue and Customs will tighten up on some of the requirements in 2020.
Under current Making tax Digital (MTD) for VAT rules, businesses are required to keep a digital record of each supply received and distributed, as well as the time of supply, its value and VAT rate. The software holding the data must also be capable of submitting a VAT return digitally to HMRC via their MTD for VAT platform.
The MTD for VAT requirements created a problem for businesses using more than one bookkeeping software package to hold their digital records, as the rules require them to be ‘digitally linked’. Therefore, HMRC allowed a ‘soft-landing period’ giving businesses a further year to implement these ‘digital links’. During this time, businesses can manually transfer figures between software packages.
From 1st April 2020, the exchange of bookkeeping data between software packages must be made digitally. It is recommended that businesses affected by the end of the ‘soft-landing period’ should start planning for this as soon as possible.
It should be noted that MTD for VAT was deferred to 1st October 2019 for a particular group of complex businesses, such as trusts and VAT groups. If the deferral applies to you, the 12-month soft-landing period for digital links starts from 1st October 2019; not 1st April 2019.
Changes to Penalties
HMRC acknowledged that some business owners may face problems meeting their new obligations under MTD, so stated it will take a proportionate ‘light touch’ approach to record-keeping penalties for one year from 1st April 2019. This means that, where businesses are doing their best to comply, HMRC will not pursue record-keeping penalties in the first year of mandation.
However, there are no changes to all other VAT penalties for late VAT returns or late payment of VAT.
Also remember, the ‘light touch’ only applies to record-keeping penalties and only where businesses have made a genuine effort to comply with MTD requirements. Those who ignore them or make limited efforts, could still be in danger of receiving record-keeping penalties.
This ends on 1st April 2020. Therefore, it is important that all businesses affected should ensure they have adequate software and processes in place to ensure they have the digital links between their software to ensure compliance, to avoid these penalties.
At TaxAssist Accountants, we can help VAT-registered businesses understand the additional requirements of MTD for VAT from next April.
If you require support in making your businesses fully compliant, please don’t hesitate to arrange a free initial consultation on your MTD for VAT situation by calling 0800 0523 555. Alternatively, you can drop us a line via our online enquiry form and we’ll be in touch as soon as we can.
By Samantha Skyring FCCA
Last updated November 2019
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.