Making Tax Digital is one of the most ambitious tax initiatives attempted by the government. By April of next year, almost all business are expected to have integrated some form of digital tax reporting software into their processes. Presently, only businesses who have a turnover greater than £85,000 are expected to have digitized their processes. Whilst these businesses have had plenty of notice, it seems that around 100,000 businesses are still yet to sign up. These businesses will have received letters from the HMRC informing them of their obligations, and now the HMRC are about to give out stricter penalties for those who have still not complied. This article will have a look at what penalties these businesses have not yet signed up for Making Tax Digital can expect and how they can sign up for MTD to avoid these penalties.
What Penalties Will There Be For Failure To Comply With MTD?
As it stands, the current penalty is a fine of up to £400 for failure to use MTD software when submitting VAT returns. So far they’ve actually been pretty lenient with this as they understand that the software signals quite a drastic shift for most users. However, they have made it clear they are going to become far less reluctant to hand out these fines from this point onwards. They have not ruled out increasing these fines.
HMRC are also in the process of trialling closing the online VAT return function to businesses who still haven’t signed up for MTD. In essence, they would be forcing these businesses to sign up for Making Tax Digital in order to file their VAT returns.
This would obviously cause quite a bit of disruption and so at the moment the HMRC are trialling it with 800 businesses to see how well this sanction works. If you find yourself in this situation, you will be prevented from filing returns for July-August and will need to ensure you are signed up in time to submit the return by 7th October.
How To Register For Digital VAT Returns
Businesses who are not yet signed up for MTD can be forgiven since recent reports suggest that less than 15% of accountants completely understand this stage of MTD. This section should you give you a bit more insight on what you need to do in order to sign up for MTD.
Step 1: Get VAT Registered (assuming you’re not already).
Step 2: Get Compatible Software.
There are quite a few options when it comes to this. You can either use software that completes the entire VAT Returns process or just one that takes data from your spreadsheets. You can find a tool which allows you to find compatible software on the GOV website.
Step 3: Get Relevant Information Ready
You’ll need all your relevant information such as National Insurance Number and Unique Taxpayer Reference code. You will also need a Gateway User ID and your latest VAT Return.
Step 4: Complete the application.
You can find the link to the application here.
Using An Agent
You can also use an agent, such as us at J&P, to help you sign up. You will need to provide all the information to your agent and just let us do the rest. We can then file your returns and keep a track of them. The timing’s of your VAT Returns should not be affected and we will inform you as soon as we get confirmation that your return has been digitally submitted.
Conclusion – Get Signed Up For Your VAT Returns
It is imperative that you get your business signed up for MTD as soon as possible if you’re turnover exceed £85,000. Even for those of you who have a lower turnover it is worth considering signing up for MTD early since pretty much all businesses will be required to be signed up by April next year.
If you are still unsure about MTD, you can find our previous article on the topic here.
At J&P Accountants we want to make Making Tax Digital manageable for your business. We can:
- Advise you on the MTD process
- Simplify MTD compliance for your business
- Advise on the best types of MTD software
- Submit VAT returns on your behalf