HMRC has published a new Factsheet CC/FS69 which sets out compliance checks to be made to avoid penalties for Making Tax Digital (MTD).
Under MTD, VAT-registered businesses must keep certain records digitally and file their VAT returns using compatible software.
The Factsheet covers:
- signing up to MTD – go to www.gov.uk and search for ‘VAT record keeping’. A business must have functional compatible software in place before you signing up
- filing VAT return using functional compatible software. This needs to be able to record and store digital records, provide HMRC with information and VAT returns from the data held in those digital records, and receive information from HMRC
- keep records digitally in an “electronic account” (all transactions must be contained in an electronic account but there is no need to scan paper records like invoices and receipts)
- use digital links to transfer or exchange data
- use the checking functions within the software (to ensure returns are correct before being filed)
Penalties
HMRC levy penalties for MTD for the following actions:
- filing returns not using use functional compatible software. A penalty applies for every return filed in error
- not keeping records digitally, a penalty applies for every day on which a business does not meet this requirement
- not using digital links to transfer data between pieces of software, a penalty applies for every day on which a business does not meet this requirement
- not signing up to MTD
These penalties apply in addition to existing penalties and interest charged for a range of misdemeanours from late returns to deliberate underdeclarations.