Businesses rushed for last-minute sign up for Making Tax Digital (MTD) before the first quarterly VAT submission deadline, according to figures from HMRC.
A blitz from software advertisers, and online updates from the government, encouraged qualifying businesses to register before by 7 August, the deadline for submitting their first quarterly VAT filing using MTD. Sole traders and businesses registered for VAT over the £85,000 threshold must file their VAT returns digitally since 1 April.
Around half a million businesses completed registration in the month leading up to the deadline, resulting in 90% compliance by 1.2 million businesses affected by MTD. However, around 120,000 businesses have not complied and may be liable for penalties, unless they have an exemption until 1 October.
HMRC has said it is treating the first year of MTD with greater leniency than usual, keeping in mind that businesses need time to adjust. Those that have missed the initial registration deadline, but are seen to be trying to comply, will not be sent filing or record-keeping penalties.
Businesses already exempt from online VAT filing before MTD will continue to be exempt. Those affected by disabilities, age or location factors or religious beliefs that make it harder to adapt to the new system can apply for exemption.
Once the ‘soft-landing’ period ends in April 2020, the normal VAT penalty regime will resume and HMRC will issue fines for late payment. Businesses that have defaulted on their VAT returns over the past 12 months could receive a cumulative penalty that increases according to the number of defaults. More than six defaults across 12 months could result in a 15% fine of the total VAT due. Careless or deliberate inaccuracies in either under- or over-statements could result in 100% penalties.
If your business qualifies for MTD, make sure that your software is MTD compatible and that you have registered. Keeping accurate records should ensure you don’t receive any unwanted correspondence from HMRC next spring.
To discuss how we can help your business with Making Tax Digital please contact one of our Accounting & Business Advisory on 01142 664 432 or info@smhca.co.uk
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