Less than 6 months now to go until tax gets digital via H M Revenue and Customs’ (HMRC) “Making Tax Digital” initiative. Yet a huge 40% of the affected businesses know nothing about it and have made no plans to conform with the new requirements for submission of their VAT Returns.
From 1 April 2019 VAT registered businesses with turnover above the VAT registration limit (£85,000) must submit their VAT Returns using HMRC approved digital software. The present online VAT filing system will be removed for businesses meeting the MTD criteria. The first VAT Return for a business’ VAT Return period starting after 1 April 2019 must be submitted digitally via “Application Programmed Interfaced” software (this just means that the digital software used must be capable of communicating with HMRC’s own digital software).
Whilst HMRC are expected to be lenient for the first year until people get their digital systems in place, they have published a penalty regime which will come into force from 1 April 2020 for late submissions and payments.
The regime is points based and will only apply to returns with a regular filing frequency e.g. monthly, quarterly or annually. It will not apply to occasional returns e.g. a return to report a one-off transaction.
A taxpayer will receive one point every time they fail to make a return on time. A penalty will be charged and notified once the taxpayer has reached the threshold penalty applicable to the frequency of submission periods as follows:-
| Submission frequency | Penalty threshold |
| Annual | 2 points |
| Quarterly | 4 points |
| Monthly | 5 points |
Points will have a lifetime of two years calculated from the month after the month in which the failure occurred. Points will expire after a period of good compliance i.e. filing returns on time as long as all returns due within the preceding 24 months have been submitted. The regime for period of good compliance is again set on the frequency of the returns as follows:-
| Submission frequency | Period of good compliance |
| Annual | 2 submission |
| Quarterly | 4 submissions |
| Monthly | 6 submissions |
As yet HMRC have not issued the amount of the financial penalty to be charged but Saints will keep you advised of this.
As everyone knows time flies, so it is sensible for VAT registered business to look at their record-keeping systems for VAT now and consider switching to an HMRC approved digital package.
Here at Saints we have been planning for our clients’ needs in light of this expected development for some time. To this end we have adopted Xero Cloud software which has been approved by HMRC as being digitally compliant. We offer clients flexibility in that we can supply them with Xero and provide the necessary training for businesses to use the package themselves. Alternatively, advances in technology mean that we can offer clients a fee competitive package to maintain the required book-keeping and submit the digital returns – leaving businesses to concentrate on their day to day operations without worrying about VAT return submission deadlines.
Contact your local Saint & Co Office to learn how this could work for your business and receive a fee quote which could relieve you of a lot of hassle and stress!
