Making Tax Digital (MTD) for ALL VAT-registered businesses came into effect at the beginning of April, so if you’re not yet compliant, it’s important you do so as a matter of urgency in order to minimise the risk of receiving a penalty.
HMRC recently announced that a new ‘points’ penalty system will come into play from 2023 for those who fail to submit or pay their VAT returns on time. In this blog we’ll outline the current and upcoming penalties along with what you need to do if your VAT-registered business isn’t yet MTD compliant.
What Is MTD?
All VAT-registered businesses are now required to maintain their accounts digitally and submit VAT returns online. This is to be done via specific bookkeeping software that’s approved for MTD (you’ll find more information about this software further down this blog).
It may seem like a hassle to make the transition to digital record keeping but there are so many benefits to doing so, especially for small businesses. There are costs involved in using MTD-approved software but the benefits more than make up for it in the long run! MTD software helps to reduce mistakes that can be caused by human error and makes the bookkeeping process so much quicker and easier, saving you time and money – two of the most important assets in business!
What Is The Current Penalty?
The current fine for failing to submit a return via MTD-approved software can be up to £400 so it’s important that you get registered and become compliant as quickly as possible.
What Will The New Penalties Be?
From January 2023 a new penalty points system will come into effect, which has been likened to that of a speeding fine. Under the new regime, businesses will be fined one point for every late submission. Once a certain number of points have been reached, a £200 fine will be charged. Points will expire after two years, and the maximum number of points you can receive before being issued a fine will vary depending on how frequent your submissions are.
There will also be fines for those who do not pay their VAT bill on time. This fee will be a percentage of the VAT owed, which will continue to increase the longer that the payment is overdue.
You can find more information about the new MTD points system via the Government website.
How Do I Get My Business MTD Compliant?
If you’re unsure whether your business needs to be MTD compliant, take a look at this handy compliance checker for guidance.
Before you register your business for MTD, you might want to decide which MTD-compliant software system you’d like to use. Each software comes with its own benefits and will suit different business needs, so it’s important that you find the most suitable and effective software for your business’s individual requirements.
And that’s where we can help. We’re proud to have partnered up with several of the UK’s leading bookkeeping solutions and are able to offer our clients free software trials, giving you the greatest opportunity to find the software that works best for you. Our team of experienced accountants are also more than happy to offer advice and recommendations based specifically on your business, and are always on-hand to provide ongoing support. You can learn a little bit about each bookkeeping solution via our website or get in touch with us to find out how we can help. We also have a number of discounted licences available – but be warned, these are very limited so grab yours before they’re gone!