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HMRC and MTD

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So there are no penalties for a year, except there could be!

Ive a client who - actually - has just signed up, but hadn't because they left it a bit too late for the DD so they did as advised by HMRC and waited. There's no problem with this one as they are digitalised from April, it was just the timings for MTD set up. However, they have receieved a letter thats interesting.

It says if they miss another quarter they will be treated as if they meant to miss it.

So, de facto, they could be penalised for not signing up i.e not engaging with MTD.

However, if you do sign up you have to file under MTD - so non-compliance penalties wouldn't be an issue anyway. 

 

Doesn't this mean HMRCs "no penalties for a year" are actually nothing of the sort. They are "no penalties for a quarter". Or , if not, the letter when it says they will be treated as is they meant to miss it, is an empty threat.

Anyone would think I had no work to do!

 

 

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By ireallyshouldknowthisbut
22nd Aug 2019 14:38

"they could be penalised for not signing up i.e not engaging with MTD"

Specifically, what penalties are you concerned about?

Ie what specific legislation can HMRC use against your client, in this circumstance? I cant find any myself.

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Replying to ireallyshouldknowthisbut:
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By Kaylee100
22nd Aug 2019 14:47

Freeagent (yeah, I know, hardly legislation!) but they say....

While the Chancellor’s statement is about leniency for issuing penalties, reading between the lines there are two things we can assume might still constitute a penalty offence:

If your business is not doing its best to comply with MTD VAT filing and record keeping

If your business pays its VAT bill late

In these two scenarios, it’s safe to assume that HMRC maintains the right to apply the current VAT penalties.

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Replying to Kaylee100:
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By johnhemming
22nd Aug 2019 14:51

As it stands people should keep the digital records, but don't have to do the digital links (although they might as well).

I do think they have said, however, that as long as people are trying to comply they won't be penalised.

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Replying to ireallyshouldknowthisbut:
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By david.bransbury
22nd Aug 2019 15:39

VAT regulations 1995 reg. 25A (17)

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Replying to david.bransbury:
By ireallyshouldknowthisbut
22nd Aug 2019 15:56

@David, no, they say you must file a return using "compatible software" not that you must file under MTD.

My keypad is compatible with HMRC's portal.

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Replying to ireallyshouldknowthisbut:
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By johnhemming
22nd Aug 2019 15:58

25A(8) Where an electronic return system or a compatible software return system is used, it must take a form approved by the Commissioners in a specific or general direction.

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Replying to ireallyshouldknowthisbut:
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By david.bransbury
22nd Aug 2019 16:05

Sorry Ireally, your keypad is not an API

3. In regulation 24 before “increase in consideration” insert—
“ “API platform” means the application programming interface that enables electronic communication with HMRC, as specified by the Commissioners in a specific or general direction;
“functional compatible software” means a software program or set of compatible software programs the functions of which include—

(a)

recording and preserving electronic records in an electronic form;

(b)

providing information to HMRC from the electronic records and returns in an electronic form and by using the API platform; and

(c)

receiving information from HMRC using the API platform in relation to a person’s compliance with obligations under these Regulations which are required to be met by use of the software;”.

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Replying to ireallyshouldknowthisbut:
By SteLacca
23rd Aug 2019 09:17

Your keypad is hardware, not software.

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Replying to david.bransbury:
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By david.bransbury
22nd Aug 2019 16:01

This was enacted with

Statutory Instrument 2018 No. 261

http://www.legislation.gov.uk/uksi/2018/261/made

APIs must be used, the old rule of electronic returns are required is scrapped. These is no change in the penalty regime introduced when electronic is still in force. This was introduced in SI 2009 No 4.

(17) The table below sets out the penalties depending on the level of turnover.

Annual VAT exclusive turnover

Penalty

£22,800,001 and above£400£5,600,001 to £22,800,000£300£100,001 to £5,600,000£200£100,000 and under£100.
(18) A person may appeal against the Commissioners’ decision to impose a penalty only on the ground that—

(a)

that person is not a specified person,
.

(b)

the amount of the penalty is incorrect,
.

(c)

paragraph (3) above was complied with, or
.

(d)

paragraph (16) above applies.

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Replying to david.bransbury:
By ireallyshouldknowthisbut
22nd Aug 2019 16:21

Ah , fair point well made, I must have been reading an earlier version of the legislation.

However HMRC have said they wont be imposing penalties until at least April 2020, moreover if you have tried to comply, but done it a bit late, then I cant see anyone getting upset about it. Its certainly not worth fretting over the small chance of a £100 or £200 fine.

I have deliberately not filed a whole bunch of mine for the June quarter end, I only did a sample and am not quaking in my boots about it.

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Replying to ireallyshouldknowthisbut:
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By david.bransbury
22nd Aug 2019 18:48

I trust you realise by now I am a glass half empty kind of guy when comes to the HMRC.

Lack of digital links between compatible software, yes no penalties for the first year.

Not proper digital records, depends when they find out. In the first year, no penalty. In future years not so sure and we are meant to be getting specific MTD penalties. (If you are typing nine numbers on a spreadsheet and submitting that through bridging software - good luck explaining that).

Filing on website when you should be using an API - if it is totally obvious they are not following the law i.e. box 1 each quarter is £20,000 or more - than first time letter, second time a fine.

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Replying to david.bransbury:
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By johnhemming
22nd Aug 2019 19:18

I think HMRC have said something along the lines of if people are trying to use the API then they won't be fined.

For example one of my clients which is a foreign company cannot register for MTD because HMRC's systems won't allow it. However, they did get a chase letter about not using the API.

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By Cat N
22nd Aug 2019 15:15

If the return is late because a company simply hasn't bothered to sign up in time, they could be penalised. If the return is late because they have had technical or other problems signing up, they won't be penalised. At least, that is my understanding. I guess you need to have records to prove that you have been in touch with HMRc to report any problems.

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