HMRC has announced that a new points-based system for MTD non-compliance is likely to be introduced, although further details are still to be finalised.
This is in addition to the existing VAT penalties regime for late payment.
Points will be applied each time a MTD report is submitted late. This could be potentially problematic for taxpayers with multiple businesses (for example, those with, say, both a trading business and a lettings business, as they will be required to submit separate MTD reports for each business on time).
If the taxpayer reaches their MTD points threshold, they become liable for financial penalties. In some situations, it may be possible to appeal against points and penalties, however, this is expected to be successful only in limited and exceptional circumstances.
The new penalty points system for non-compliance with MTD is not expected to be applied until 2020, so there is an element of a “soft landing”. However, businesses who fail to comply risk the associated reputational damage to their track record and relationship with HMRC. In addition, it is still uncertain as to whether the current VAT surcharge system will apply to VAT returns submitted under MTD within that “soft landing” period of 2019/20.
Where businesses are subject to special VAT regimes, such as Partial Exemption, there are further implications in terms of compliance with the MTD regime which need to be considered in terms of the end-to-end reporting requirements. However, many of the software developers now offer a range of apps and there are other solutions available which are capable of digitising the relevant calculations. If your business is subject to a special VAT regime, we would recommend that take specific advice from our dedicated VAT team, who will be able to guide you through these complex regulations.
If you want to discuss any of the points raised in this blog please get in touch with me here, or:
0141 886 6644
The information in this blog should not be regarded as financial advice. This is based on our understanding in June 2018. Laws and tax rules may change in the future.