MTDfV penalties relaxed again

HMRC has announced important changes to the proposed penalty arrangements applying in the first year of Making Tax Digital for VAT (MTDfV). What are they?

Start date. Making Tax Digital for VAT (MTDfV) takes effect for most businesses that are VAT registered and trade above the annual registration threshold of £85,000 for VAT periods beginning on or after 1 April 2019. This means that a business with VAT periods ending February, May, August and November will be the latest joiners, with MTDfV record keeping needed from 1 June 2019.

Deferrals. Around 3.5% of VAT-registered businesses will not be able to join MTDfV until VAT periods beginning on or after 1 October 2019. These are businesses with more complex VAT affairs including: trusts, unincorporated not-for-profit organisations, divisional registrations and VAT groups, businesses that make VAT payments on account, and users of the annual accounting scheme.

Tip 1. HMRC has confirmed that all VAT-registered entities which must join MTDfV on 1 April 2019 rather than 1 October 2019 can now join the pilot scheme and test their accounting systems.


Tip 2. It is important that you take advantage of this opportunity, as it’s a chance for a dress rehearsal before the main show.


Software links. HMRC has always intended to adopt a light approach to penalties in the first year of MTDfV, described as a “soft landing” period. But one issue it previously said would not escape a potential penalty was if the software link to the main VAT return was not carried out digitally. Other links between software systems could be done without a digital link in the first year. That has now changed, so cutting and pasting data will be accepted for all software links until 31 March 2020. However, the VAT return must still be delivered digitally.



Extended. Originally, the soft landing was scheduled to end on 31 March 2020, irrespective of the MTDfV start date. However, HMRC has now changed its mind and confirmed that businesses with deferred start dates will have this extended to 30 September 2020.



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