Making Tax Digital is Getting Serious
The first set of warning letters are coming through letters boxes around the country, have you received one? If so, it's time to take the necessary steps and sign up for Making Tax Digital so you don't encounter problems.
A quick reminder, Making Tax Digital is a new government scheme intended to modernise the way tax is recorded in the UK, eventually requiring all businesses to submit VAT returns to HMRC digitally using appropriate software.
It came into effect 1st April 2019 for businesses with an annual turnover in excess of £85,000 (though that didn't make it a necessity for all qualifying businesses to register immediately). Full information on the scheme can be seen on our previously posted Making Tax Digital infographic.What happens if I don't comply with MTD?
With the advent of MTD, HMRC is bringing in a new penalty system for businesses that fail to comply with the scheme or are late in submitting.
There will be an initial grace period, to allow businesses to come to terms with the new method of submitting VAT returns. However, this period is unlikely to last very long, so making sure you're compliant is imperative.
Once the grace period has elapsed, the point-penalty regime is set to be enforced 15 days after submission is missed.
After 15 days, a late filing will incur penalty points, which will accrue based on how late the filing is and the number of prior late filings. Points are received each time a submission is not made on time. Once the points threshold is reached, a penalty is charged.
The points incurred will function similarly to those on a driving licence and so can be appealed. Following a period of compliance, all points will be reset to zero.
Penalties double if 30 days passes without payment. After that point there are daily penalties charged. When busy running your business, a month can quickly pass and with these penalties you could soon encounter very big problems if you leave them. So, making sure you're complaint and on-time is essential for the future of your business.What do I do if my business isn't MTD ready yet?
Even if you think your business already complies with MTD, there's a chance that it doesn't. Research commissioned by accounting software providers QuickBooks, found that 46% of small businesses over the threshold surveyed, wrongly believed they were MTD-compliant
This was down to a number of reasons:
- Businesses that already operated digitally prior to Making Tax Digital coming into effect incorrectly believing there was nothing for them to do. For businesses that were already submitting VAT returns online through their Government Gateway account, the switch needs to be made to an MTD-compatible software that can securely transmit and receive data to and from HMRC without requiring it be typed manually.
- It also turns out that some businesses are already using compatible software, but haven't realised they need to register for MTD as well, through their business tax account.
- Additionally, there will be businesses that simply haven't got round to registering yet. Or, somehow, those who still aren't aware that they need to be registered for MTD.
Do any of these sound like you?
If so, MoynanSmith can help. From making sure you're registered for MTD, to helping you choose the best software and getting to grips with it, we'll make sure you don't fall foul of any penalties.
Get in touch today and one of our tax advisers will help you. We've been awarded 'Making Tax Digital ProAdvisor' status by QuickBooks, so you can rest assured we know what we're doing. Give us a call on 01228 586790 to speak to us sooner.