Making Tax Digital for Business
13 February 2019
HMRC has updated its MTD communication pack with some additional FAQs on ‘soft landing’ and penalties.
Most VAT-registered businesses with a taxable turnover above the VAT threshold (currently £85,000) are required to keep digital VAT business records and send VAT returns using Making Tax Digital-compatible software from 1 April 2019.
HMRC’s ‘Making Tax Digital for Business – stakeholder communications pack’ provides information for stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers and members.
The following questions have been added to the FAQ section:
What does the ‘soft landing’ period actually mean? Does it cover all penalties for MTD?
No. The ‘soft landing’ period only covers the digital links requirements as set out under 3.2 .1 Digital links in the VAT Notice 700/22.
Businesses will have a ‘soft landing’ period to put in place digital links between software products where they use more than one product to meet their digital record keeping requirement. Businesses mandated to join Making Tax Digital for VAT from:
- 1 April 2019 will have until their first VAT return period starting on or after 1 April 2020 to put digital links in place between software products
- 1 October 2019 will have until their first VAT return period starting on or after 1 October 2020 to put digital links in place between software products
Are there any penalties for not complying with MTD? What happened to HMRC not coming down hard on those trying their best?
Yes. HMRC recognises that businesses will require time to become familiar with the new requirements of MTD.
HMRC has been clear that during the first year of mandation it will not pursue record-keeping penalties where businesses are doing their best to comply with the law. But this does not mean a blanket ‘no penalties promise’.
The VAT Default Surcharge (DS) regime will continue to apply to safeguard VAT revenue, and other sanctions remain possible for deliberate non-compliance. MTD should not increase the risk of this penalty, as this penalty is only levied where a business doesn’t pay their VAT or pays late while in DS. Customers who receive a DS can contact HMRC if they have a reasonable excuse for this and HMRC will take account of all the relevant circumstances into consideration.
If a customer faces issues outside their control, such as an IT failure, and ends up receiving a penalty, HMRC would strongly encourage them to get in contact with their software provider or HMRC as soon they can. HMRC wants to ensure that MTD lands well and customers feel supported, where needed.
Making Tax Digital for Business – stakeholder communications pack