Category Archives: MTD

VAT: How to remove penalty points under the new system

By   9 January 2023
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HMRC has introduced new penalty and interest rules for late returns and payments from 1 January 2023. Details here.

On 4 January 2023 HMRC published guidance on how to remove these points to avoid a penalty. This is particularly important if a business has reached the penalty point threshold.

The penalty thresholds are:

  • annual returns – 2 points
  • quarterly returns – 4 points
  • monthly returns – 5 points

If a business is at the limit and has the maximum points allowed for its accounting periods, it can remove them by meeting two conditions which are:

  • to complete a period of compliance, submitting all returns by the deadline
  • to submit all outstanding returns for the previous 24 months

The guidance sets out how these tests are calculated and applied.

VAT: MTD reminder

By   4 October 2022
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HMRC have announced that the existing Making Tax Digital (MTD) online portal closes on 31 October 2022.

What businesses need to do now (or they could face a penalty)

If businesses haven not signed up to MTD and started using compatible software already, they must follow these steps now:

Step 1

Choose suitable MTD-compatible software they can find a list of software on GOV.‌‌‌UK.

Step 2

Check the permissions in their software – once they have allowed it to work with MTD, they can file their VAT returns easily. Go to GOV.‌‌‌UK and search ‘manage permissions for tax software’ for information on how businesses should do this.

Step 3

Keep digital records for their current and future VAT returns – a business can find out what records they need to keep on GOV.‌‌‌UK.

Step 4

Sign up for MTD and file their future VAT returns using MTD-compatible software – to find out how to do this, go to GOV.‌‌‌UK and search ‘record VAT’.

Businesses who file quarterly or monthly VAT returns must complete these steps in order to file their returns due after 1‌‌‌ ‌‌November.

Exemption from MTD for VAT

There are exemptions from MTD and they my be applied for here.

VAT: Making Tax Digital (MTD) Reminder

By   23 August 2022
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HMRC has issued a reminder that:

  • from 1 November 2022, taxpayers will no longer be able to use their existing VAT online account to file their monthly or quarterly VAT returns
  • taxpayers that file annual VAT returns will still be able to use their VAT online account until 15 May 2023
  • by law, VAT-registered businesses must now sign up to MTD and use MTD-compatible software to keep their VAT records and file their VAT returns
  • there are penalties for businesses that do not sign up for MTD and file their VAT returns through MTD-compatible software,
  • even if taxpayers already use MTD-compatible software to keep records and file their VAT returns online, they must sign up to MTD before they file their next return
  • businesses may be able to get a discount on software through the UK Government’s Help to Grow: Digital scheme, which offers 50% off compatible digital accounting software