For the first year of Making Tax Digital, HMRC have used a “light touch” when considering penalties for non-compliance. This has been known as the soft landing period – a period for “business to have in place digital links between all parts of their functional compatible software.” Simply put, HMRC will not penalise a business for not having a digital link in place. However, the soft landing period expires on April 1st 2020 for most UK VAT registered businesses, and the penalties system will be revised to bring it in line with Income Tax and Corporation Tax.
The penalty points system for VAT
The new penalties will be based on a points system. Late VAT submissions will accrue penalty points that last two years before they expire.
The submission penalties are:
One penalty point for missing a VAT return.
A fine after four accrued points for missing a quarterly VAT return.
A fine after four accrued points for missing a monthly VAT return.
There is also a change for late payment of VAT returns:
No penalty for up to 15 days late payment.
50% of HMRC interest rate charge for between 15 and 30 days late payment.
100% of HMRC interest rate charge plus daily interest rate charge for more than 30 days late payment.
There’s no need to stress about Making Tax Digital – but you must act now as time is running out to get your digital links in place ready for the first VAT period after 1st April 2020 and avoid HMRC penalties.
BTCHub is flexible bridging software that allows you to maintain your current sales and bookkeeping methods while being MTD for VAT compliant. You can bring in data from multiple sources and build your VAT return in BTCHub, or import from Excel using the handy add-in, making digital links simple. You can avoid the headache of expensive HMRC penalties with BTCHub.
Get in touch with our friendly consultants on 0345 241 5030 to find out more!