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
All transactions must be contained in the functional compatible software there is not a requirement to scan or upload supporting documents like invoices and receipts.
Thursday, 7 July 2022
MTD For VAT - New Guidance on Penalties For Non-Compliance
Tuesday, 5 April 2022
Making Tax Digital (MTD) is now mandatory for VAT-registered businesses
MTD became mandatory for all VAT registered businesses on the 1 April 2022.
The government states that MTD helps taxpayers get their tax returns right by reducing common mistakes as well as saving time managing their tax affairs and is a key part of the overall digitalisation of UK tax.
Evidence shows MTD is succeeding in its central aims of reducing errors, while also making it faster to prepare and submit returns and boosting productivity for businesses. New research, conducted by HMRC and peer reviewed by independent academics, shows MTD is likely to have generated increased revenue for the Treasury, through reducing errors in both 2019 and 2020.
Nearly 1.6 million taxpayers had joined MTD for VAT as of December 2021 with more than 11 million returns successfully submitted.
VAT-registered businesses that have not yet signed up to MTD for VAT should do so now. All VAT-registered businesses must use MTD for VAT for their first VAT return period that starts on or after 1 April 2022. For any business concerned about this, we can help to choose the software that is right for you.
Please contact us about MTD – we are here to help!
Tuesday, 5 October 2021
HMRC Publish Guidance on New Penalty Regime for Late Returns
The Finance Act 2021 introduced a new regime for late VAT returns that will apply to VAT periods commencing on or after 1 April 2022 and to other returns at a later date.
HMRC have now published detailed guidance on the new rules. The reforms come into effect:
• for VAT taxpayers from periods starting on or after 1 April 2022
• for taxpayers within MTD for Income Tax Self-Assessment (ITSA), from the tax year beginning 6 April 2024
• for all other ITSA taxpayers, from the tax year beginning 6 April 2025
The new regime will be a points-based system and will operate in a similar way to motoring penalties in that the points will elapse after a period of time depending on the regularity of the returns.
For details see: Penalties for late submission - https://www.gov.uk/government/publications/penalties-for-late-submission
Friday, 6 August 2021
6th August 2021 – Hillmans Weekly Update
Below I have summarised all the main tax related updates we have seen this week.
• Coronavirus Job Retention Scheme – Update
• Self-Employment Income Support Scheme update
• Abolition of Basis Periods and New Tax Year End?
• MTD Coming Soon for Income Tax
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a great weekend.
Stay safe and well.
Cheers,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
Monday, 2 August 2021
MTD Coming Soon for Income Tax
VAT registered business making taxable supplies above the £85,000 registration threshold have been grappling with Making Tax Digital (MTD) since April 2019. The next roll-out will be the introduction of MTD for income tax which is scheduled to start in April 2023.
The obligation to keep records in a digital format and report information quarterly will apply to unincorporated businesses and property landlords with gross income in excess of £10,000 a year. Businesses operating MTD for VAT will already have MTD compliant accounting software but the extension of MTD to income tax will mean a major change for property rental businesses who are outside of the current rules.
There are a number of MTD compliant accounting software packages that you might wish to consider and we can of course advise you on the one that is most appropriate for your business. There are even relatively cheap software packages specifically designed for property rental businesses.
INFORMATION IN QUARTERLY MTD FOR INCOME TAX REPORTS
The precise details of what needs to be reported each quarter have yet to be finalised, but the categories of income and expenditure are likely to be the same as currently reported for self-assessment.
The accounting software will need to record income and expenditure into the following main categories:
• Turnover/gross rents
• Costs of goods sold
• Materials
• Wages and salaries of employees
• Sub-contractor costs
• Rent, rates, power, insurance
• Repairs and renewals
• Professional fees
• Telephone and other office costs
• Interest on bank and other loans
• Motor and travel expenses
It is unclear at this stage how loans to finance residential lettings will be reported as those costs are no longer deducted in arriving at rental profits as relief is now given by way of a basic rate tax deduction.
TIMING OF MTD FOR INCOME TAX REPORTS
It is currently proposed that there will be 4 quarterly reports to HMRC followed by a finalisation return when end of year adjustments will be made. For a buy to let business that would mean quarterly returns made up to 5 July, 5 October, 5 January and 5 April. There would then be a MTD finalisation submission the following 31 January.
Wednesday, 12 May 2021
Making Tax Digital (MTD) for VAT – end of “soft landing”
MTD for VAT currently applies to VAT registered businesses with taxable turnover in excess of £85,000, the current VAT registration threshold. From 1 April 2022, MTD for VAT is being extended to all VAT registered businesses.
HMRC have updated their guidance in VAT Notice 700/22 regarding MTD for VAT:
https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat
This publication is essential reading for all VAT registered business as some of the content has the force of law.
The notice:
• explains the digital records businesses must keep, and ways to record transactions digitally in certain special circumstances
• explains what counts as compatible software, and when software programs do and do not need to be digitally linked where a combination of programs is used
• gives examples of when digital links are required
Section 4 alerts businesses to the end of the “soft landing” period:
HMRC gave a period of time (known as the soft landing period) during the first 2 years of Making Tax Digital, to help businesses put digital links in place between all parts of their functional compatible software. Businesses were not required to have digital links in place until their first VAT Return period, starting on or after 1 April 2021.
During the soft landing period, if a digital link was not established, HMRC accepted the use of ‘cut and paste’ or ‘copy and paste’ as being digital links.
The soft landing period has now ended.
Friday, 29 January 2021
29th January 2021 – Hillmans Weekly Update
Below I have summarised all the main tax related updates we have seen this week.
• Business News Update
• No Self-Assessment late filing penalty for those who file online by 28 February
• Deadline for claiming third SEISS grant - 29th January 2021
• Pay VAT deferred due to coronavirus (COVID-19)
• Making Tax Digital for VAT
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a good weekend.
Stay safe and well.
Cheers,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
Thursday, 27 June 2019
June 2019 Tax Tips & News
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Tuesday, 26 February 2019
February 2019 Tax Tips & News
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Thursday, 29 November 2018
November 2018 Tax Tips & News
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Friday, 19 October 2018
October 2018 Tax Tips & News
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Friday, 21 September 2018
September 2018 Tax Tips & News
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Monday, 13 August 2018
August 2018 Tax Tips & News
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Friday, 6 July 2018
July 2018 Tax Tips & News
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Monday, 5 February 2018
February 2018 Tax Tips & News
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Friday, 13 October 2017
October 2017 Tax Tips & News
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