It is just a little over a week until most VAT registered businesses will be required to start complying with the requirements of Making Tax Digital and the ATT and CIOT caution businesses that HMRC’s promised ‘light touch’ on penalties does not extend to the late payment of tax.
From 1 April 2019, VAT registered businesses with turnover over the VAT threshold of £85,000 will be required to maintain digital accounting records and to file their VAT returns directly from Making Tax Digital compliant software.
Adrian Rudd, Chair of the joint ATT/CIOT Digitalisation and Agent Strategy Working Group, said:
“We encourage businesses to prioritise the timely payment of VAT, even if they are struggling to comply with Making Tax Digital.
“The Government has confirmed that where businesses are doing their best to comply it will apply a ‘light touch approach’ to late filing and record keeping penalties in the first year of Making Tax Digital. This anticipates the difficulties some people may face in trying and failing to adhere to the new demands of Making Tax Digital. The ‘light touch approach’ does not extend to late payment of VAT. Businesses must ensure that they pay the right amount of VAT at the right time even if they struggle or fail to keep their records digitally, or file their VAT returns through Making Tax Digital compliant software.”
The ATT and CIOT are also concerned that those who pay VAT by direct debit, but have problems filing their VAT returns under Making Tax Digital, may unintentionally be late paying their VAT bill. This is because the VAT Return acts as the trigger for payment to be taken from their bank account. As a result, if someone files their VAT Return late, their VAT payment will also be late.1
Adrian Rudd said:
“We urge businesses not to panic, but to seek advice. Making Tax Digital is a fundamental change to how businesses operate, and needs to be done right. There are about 2.2 million VAT registered businesses in the UK but only around 12 per cent of VAT Returns have been submitted through software, in other words how they will be required to be submitted under Making Tax Digital.”2
Notes to editors
- Direct debit payments are taken either three working days after the payment deadline (if the return is filed on time) or three working days after the date the VAT Return is filed (if late). If a business pays late as a result of filing late, they could incur a default surcharge. An appeal may be brought on the grounds there was a reasonable excuse if the late filing was due to Making Tax Digital problems outside of their control, for example software issues or an HMRC system crash). More on penalties for late VAT Returns can be found here.
- Statistics are available from https://www.gov.uk/government/statistics/value-added-tax-vat-annual-statistics.