MTD for VAT – New penalties for non-compliance

making tax digital
Jun
22
Posted 2022 by Jane L

HMRC have issued guidance for VAT-registered business and their agents on how to avoid penalties for non-compliance with the Making Tax Digital for VAT (MTD) rules.

In particular, there is a new £400 per return penalty if you file a return but do not use functional compatible software.

There are additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.

Key extracts from HMRC guidance include:

You must file your VAT return using functional compatible software

Functional compatible software means a software program, or set of software programs, products or applications (apps) that can:

  • record and store digital records.
  • provide HMRC with information and VAT returns from the data held in those digital records.
  • receive information from HMRC.

You must keep records digitally

You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:

  • your business name, address and VAT registration number.
  • any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
  • the VAT on goods and services you supplied, meaning everything you sold, leased, rented or hired (supplies made).
  • the VAT on goods and services you received, meaning everything you bought, leased, rented or hired (supplies received).
  • any adjustments you make to a return.
  • the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
  • the rate of VAT you charged on goods and services.
  • your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
  • copies of documents that cover multiple transactions made on behalf of your business, like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash.

All transactions must be contained in your electronic account, but you do not need to scan paper records like invoices and receipts.

Please contact us if you need assistance in complying with MTD.

See: Compliance checks: How to avoid penalties for Making Tax Digital for VAT – CC/FS69 – GOV.UK (www.gov.uk)

Who can help you with MTD for VAT?

We can!
We can help you with:

  • Choosing the best accounting software package for your business. You can even request a free demo of them.
  • Assisting you with your VAT preparation, completion and filing within the new regime
  • Oursourcing your VAT, payroll, self assessment and many other accounting tasks
  • Business planning, forecasting and business growth advice.

Our clients have access to our own support team for their cloud accounting / software enquiries.

Our team are really patient and will speak to you in a language that you can understand. But more than that, they take the worry away from you, leaving you to run your business.

See some of our reviews below and get in touch.

Next steps

If you feel that you could benefit from chatting about MTD for VAT with one of our team, do get in touch. We are already answering our clients’ questions with MTD training and would love to help you get to grips with it too.

What our clients say about us

Very happy with the ongoing support provided by this company. Sarah is so helpful and patient and nothing is too much trouble. She responds quickly to all my questions and always has the solution! [Sarah helps Janet with Xero and Dext]

Janet Cushnaghan

Sarah is a fantastic, knowledgeable all-round accountant who helps us every month with our VAT, CIS returns and all general areas of our books to ensure they are accurate and tidy. Highly competent professional, nothing is too much effort or a silly question. She has helped us get to grips with and understand the accounting principles by explaining things clearly, always giving us helpful advice and seeing ‘the bigger picture’. Promptly follows up queries and is proactive with reminding us of key dates throughout tax year. Gives me confidence in using the accounting software and helps with where to go to find specific training. Friendly and approachable and always willing to help. Would highly recommend!

Uses: QuickBooks Online, QuickBooks Self-Employed, QuickBooks Desktop

Services: Accounting, Book cleanup, Bookkeeping, Business budgeting and forecasting, Consulting, Financial reporting, Payroll, QuickBooks consulting, QuickBooks Payroll, QuickBooks setup, QuickBooks training, Self-assessment returns, Small business tax, Tax preparation, Tax services, Tax setup

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