MTD FOR VAT - NEW GUIDANCE ON PENALTIES FOR NON-COMPLIANCE
HMRC have also issued new guidance on the penalties that they impose for non- compliance with the Making Tax Digital (MTD) for VAT rues.
In particular, there is a penalty of up to £400 for every VAT return a business files without using ‘functional compatible software’.
Functional compatible software means a software program, or set of software programs, products or applications that can:
• record and store digital records
• provide HMRC with information and VAT returns from the data held in those digital records
• receive information from HMRC
There are additional penalties if the business does not keep their records digitally.
HMRC may charge the business a penalty of between £5 to £15 for every day on which the digital record keeping requirement is not met.
To meet the digital record keeping requirement, the business’ functional compatible software must contain:
• the business name, address and VAT registration number
• any adjustments from calculations made outside the functional compatible software for any VAT accounting schemes used
• the VAT on goods and services supplied, meaning everything the business sold, leased, rented or hired (supplies made)
• the VAT on goods and services received, meaning everything the business bought, leased, rented or hired (supplies received)
• any adjustments made to a return
• the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything bought and sold
• the rate of VAT charged on goods and services
• details of any ‘reverse charge transactions’, where the business needs to record the VAT on the sale price and the purchase price of the goods and services bought
• copies of documents that cover multiple transactions made on behalf of the business like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash
As all transactions must be contained in the functional compatible software there is not a requirement to scan or upload supporting documents, however we believe this is a step which makes the bookkeeping records complete.