Changes to MTD VAT and the new VAT penalty scheme

Changes to Making Tax Digital

Changes to MTD VAT

From April 2022 all VAT registered businesses were required to sign up to MTD for VAT to make their quarterly VAT submissions under MTD rules and the facility to submit VAT returns using their existing online VAT account was removed in November 2022.    Any remaining VAT businesses who are on annual schemes and not yet signed up to MTD will also have their facilities to submit VAT returns on the existing online VAT account removed (from 15 May 2023) and will also be required to make future MTD VAT submissions using MTD compatible software.  HMRC will automatically sign up any remaining non-compliant VAT businesses unless there is an exemption in place or are waiting for approval for an exemption.  Please see the link below for more details on exemptions for MTD VAT

New VAT Penalty Scheme

HMRC have also introduced a new penalty regime which applies to VAT periods commencing on or after 1st January 2023 for both late VAT submissions and late VAT payments:

Penalties for late VAT submission should you be late submitting a VAT return, each time you file the return late you will receive a penalty point.  Should your penalties reach the threshold then a £200 penalty will be issued and any further penalties will be subject to additional £200 penalties for each late submission.  Points do expire and are removed if you do not reach your threshold.  However if you do reach the threshold and incur a penalty then there will be a period of compliance before the penalties are removed from the VAT account.  All thresholds, expiry periods and compliance periods depend on whether you submit monthly, quarterly or annual VAT returns.  For more details please click here

Penalties for late VAT paymentspenalties for late VAT payments will be applied to the following:

  • On your VAT return
  • Following an amendment to a return or correction
  • From a VAT assessment HMRC issued when you did not submit your return
  • From a VAT assessment HMRC issued for another reason

Penalties will be applied if your payment is more than 16 days late or you do not enter a Time to pay arrangement before day 16.  Penalties will increase on day 31 however HMRC will be giving a period of soft landing and will not charge any late payment penalties up to 31st December 2023, to allow for the change, as long as the VAT payment, before day 31, is either made in full or a Time to pay arrangement is agreed.

Interest will still be charged from the first day the VAT payment is late.

For more information on penalties for late VAT payments please click here

You can find out more on our Making Tax Digital page or contact your local Perrys office.