Making Tax Digital for VAT (MVD) was introduced for the first VAT accounting periods commencing on or after 1 April 2019. To date no penalties have been charged but that is about to change.
HMRC have adopted a ‘soft landing’ period for filing penalties for the first 12 months, provided that businesses can demonstrate that they have made reasonable attempts to comply with MVD. This has also applied to the requirement to use digital links between VAT records.
For those businesses mandated into MVD from April 2019 the soft landing period is about to come to an end. If they have not already done so, these businesses should now ensure that all returns are filed on time and that compatible software is being used with full digital links in place. If not, then daily and tax-geared penalties will be charged from 1 April.
The exception for digital links is where the business has particularly complex or a legacy IT system and has had the April 2020 deadline extended by HMRC. Those businesses who had their MVD start date deferred to 1 October 2019 will join the penalty regime from 1 October 2020.
Links to our guides:
Making Tax Digital: VAT (subscriber guide)
What is Making Tax Digital (MTD) for VAT? What is VAT 'functional compatible' software? What do you need to report their VAT? Are there penalties for making mistakes?
MVD: functional compatible software
Businesses mandated into MVD for VAT accounting periods starting on or after 1 April 2019 must use 'functional compatible software'. What is this and what are the key requirements?
Making Tax Digital (for VAT) tool: who has to join?
Our tool aims to guide you through the requirements to see whether you will have to update your software or systems in order to file VAT returns under the MVD rules.