MTD digital links penalty

Anyone actually seen any penalties for MTD?

Didn't find your answer?

Just wondering if anyone has experience of clients receiving penalties from HMRC for MTD compliance failures relating to digital records/digital links yet?

Not worried about late filing or late payment penalties, but wonder if HMRC is starting to raise fines for non-compliance with the "digital" bit of MTD yet?

Replies (8)

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By Jason Croke
11th Jun 2024 11:43

Nope, never seen any penalties for non-MTD compliance.

Of the several VAT inspections in the last few months, all but one was done via emails and sending .pdfs and reports via email. I've sent Excel only reports, downloads from QB/Xero, pdf of invoices and bank statements.

Never been asked about whether any of these entries are MTD compliant, I get the impression HMRC are just focused on spotting the usual stuff such as why sales are zero rated, purchase invoices not having VAT number or descriptions, etc.

The one in-person inspection, the Officer asked for reports and documents to be emailed to him - same as all the virtual inspections!, but he did also discuss the business with the business owner. But he didn't look at any of the clients actual electronic records, didn't ask for a guest login, etc.

Maybe HMRC officers are just not comfortable with digital records!

Thanks (7)
By Paul Crowley
11th Jun 2024 11:47

I doubt that the average officer has had any training on the real detail of compliance with digital links.

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Replying to Paul Crowley:
By ireallyshouldknowthisbut
11th Jun 2024 12:12

you could have stopped before "on".

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Replying to ireallyshouldknowthisbut:
By Paul Crowley
11th Jun 2024 13:40


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By ireallyshouldknowthisbut
11th Jun 2024 12:11

I doubt HMRC give 2 hoots, they do tax collection not bookkeeping. Stepping into record keeping is a massive overeach and they simply dont have the resources tocheck it, or motivation to do so either.

If you look at their actual sanctions on this it is very limited. First offence is a warning. Second offence is a small cash fine. I cant remember the sum but its trivial for most busineses.

As ever, dont look at the rules, look at the risk and consquences of non-compliance. It then becomes a business decision for the client to balance the two.

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By FactChecker
11th Jun 2024 13:08

Lovely question! It skewers the 'primary purpose' of MTD much like those unkind butterfly-collectors used to do with their 'trophies'.

I'd often wondered *how* HMRC were going to police this central plank of all their current policies (aka 'everything digital') - but never bothered to think it through in serious detail.

Even in their original vision (no bridging software then) it was going to be a tall order - since all that their systems *might* be able to detect is which software made the submission (not from where that software obtained its data, let alone whether or not that involved any human manipulation).

FWIW as HMRC appear to have only belatedly realised (and some taxpayers are still unaware about this) ... there is NO rule/edict that data must be untouched by human intervention during its often multiple-steps of processing (from one system to another and repeat).
What is supposed to be forbidden is the *direct entry* by humans of the figures being submitted into the submission software - which is why bridging software sounded the death knell for the supposed original objective.

HMRC probably wouldn't have had either the technology or budget or human skills to detect any contraventions under their original vision ... but it is now an impossibility unless they put trained people on-site and spend a few days trying to catch out an employee making a last minute 'adjustment' direct (rather than via one of the feeder systems).

Chances of that? Closer to zero than measurable.

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Replying to FactChecker:
By ireallyshouldknowthisbut
11th Jun 2024 13:34

my spreadsheet client process involves a *whispers* cut'n'paste to a master spreadsheet rather than digital links as they kept messing up and it was more reliable.

I also regularly key adjustments into xero for the box 6& 7. Henous crime.

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Replying to FactChecker:
By Simon_GNR
12th Jun 2024 14:23

3 years ago we (a £20m p.a. turnover manufacturing company) moved from an old software accounting system that didn't have a hope in hell of complying with the MTD digital links requirements to one that is fully MTD compliant. For us it was a happy coincidence that the change of software, which was a commercial decision by our holding company with no consideration of MTD for VAT, enabled us to move with a system that does link directly to HMRC and allows us to be compliant with MTD.

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