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HMRC warning about MTD for VAT penalties from 1 November

HMRC have stressed that penalties will come into force from 1 November for anyone who does not submit VAT returns in a Making Tax Digital (‘MTD’) compliant way.

HMRC had stated that they would take a light touch for those not complying with the rules, which have been in force for some businesses since 2019.

HMRC chief executive Jim Harra has taken the step of writing to accountancy firms reminding them that ‘from Tuesday 1 November 2022, their clients will no longer be able to use their existing VAT online account to file their quarterly or monthly VAT returns.

‘By law, VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use MTD-compatible software to keep their VAT records and file their VAT returns.

‘If your clients do not sign up for MTD and file their VAT returns through MTD-compatible software, they may have to pay a penalty. The best way for businesses to avoid penalties is to start using MTD now.’

HMRC can charge a penalty of between £5 and £15 for each day a business fails to comply with the rules.


How will the MTD for VAT penalties work?

All businesses that are VAT registered must sign up for MTD for VAT and the first step is to choose MTD-compatible software to file VAT returns.

Businesses who file quarterly or monthly VAT returns must be registered for MTD in order to file their VAT returns due after 1 November or risk a penalty.

Those who are already exempt from filing VAT returns online or if they or their business are subject to an insolvency procedure, are automatically exempt.

Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023.

Two of our previous articles can be found here MTD for VAT, MTD for VAT – Penalties for non-compliance.

The penalties for non-compliance with MTD are not insignificant.  If you need our help with any aspect of MTD for VAT please get in touch with Gemma McCaldon-Gower at Gemma.McCaldon-Gower@cowgills.co.uk

MTD for VAT penalties

The information was correct at time of publishing but may now be out of date.

Posted by Cowgills
10th October, 2022
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