This week HMRC will be sending email reminders to all VAT-registered businesses to remind them that they will now need to keep digital records, sign up to MTD and file all their future VAT returns using the MTD-compatible software.
If you do not meet HMRC requirements for MTD then there will be penalties for non-compliance.
There is a new £400 per return penalty if you file a return but do not use functional compatible software.
Also, additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.
Key extracts from HMRC guidance include:
You must file your VAT return using functional compatible software
Functional compatible software means a software program, or set of software programs, products, or applications (apps) 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.
You must keep records digitally
You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:
- Your business name, address, and VAT registration number.
- Any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
- The VAT on goods and services you supplied, meaning everything you sold, leased, rented, or hired (supplies made).
- The VAT on goods and services you received, meaning everything you bought, leased, rented, or hired (supplies received).
- Any adjustments you make to a return.
- The ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
- The rate of VAT you charged on goods and services.
- Your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
- Copies of documents that cover multiple transactions made on behalf of your 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 your electronic account, but you do not need to scan paper records like invoices and receipts.
Please contact our business services team if you need any assistance with compliance, or moving onto compatible software.
