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Those who enrol early for Making Tax Digital could face penalties

Business owners and contractors who sign up too early for the new Making Tax Digital service could face financial penalties as a result, the Association of Taxation Technicians (ATT) has warned.

This reform to the tax system was launched on April 1, which has led some of those who will need to file their VAT returns using it in future to believe that they have to enrol for it as soon as possible. However, HMRC has stated that the Making Tax Digital for VAT enrolment should only be carried out once the individual or business in question has submitted their final VAT return due under the earlier system and using the previous submission facility.

As Jon Stride of the technical steering group for ATT points out, when someone enrols for this new service all of his or her VAT returns – which include those covering periods that began prior to April 1 – will have to be submitted using HMRC’s new software.

He added that if that person enrols for Making Tax Digital before filing the last return due under the old system, not using the newly designed software will lead to this return being rejected by HMRC, which may create issues for companies not prepared for it and possible failure to meet the deadline. For this reason, ATT is advising people to wait until their final pre-Making Tax Digital VAT return has been filed before signing up for it.

HMRC is in agreement with this course of action, with a spokesperson stating that it views the Making Tax Digital changes as applying from April onwards and that it is simpler for businesses to file VAT returns covering earlier periods using the old system, before enrolling for it. The spokesperson added that heavy financial penalties would only be levied on people who were failing to comply deliberately, rather than those who had signed up early and encountered problems as a result though.

Speaking to Accountancy Daily, Stride went on to warn that:

“HMRC have been very clear that they want businesses to continue to pay their VAT on time under Making Tax Digital, even where they have problems filing or keeping digital records. HMRC’s light touch approach to penalties does not extend to the payment of VAT liabilities.”

He concluded by saying that in the case of late VAT payments or failure to pay, problems caused by signing up for Making Tax Digital too early will not be a defence against financial penalties for business owners. Given that few will want to risk these penalties on top of their VAT demands, many of them are likely to want to get the help of qualified self-assessment accountants to ensure that they do not fall foul of the changes.

ATT has advised any business owner who has already enrolled to get in touch with HMRC as well, so that issues can be resolved before the deadline, and to keep evidence should they need to appeal against a fine.

Posted by Peter
May 30, 2019

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