RSM, a frequent contributor to the NCC’s magazines, has provided this resume of the recent HMRC guidance.

While this was primarily targeted at small businesses under the VAT registration threshold who now fall under the Making Tax Digital (MTD) filing requirements, there are a few key points for larger businesses too:

• HMRC will levy penalties for non-compliance with the MTD requirements and for errors in the VAT return.  HMRC state that penalties for errors may be up to 100% of the error.
• The use of error checking and validation within software is highlighted and we are witnessing a trend of more businesses starting to use data analytics to aid the review of transactions when compiling the VAT return.

Challenges with MTD compliance

Complying with all the MTD requirements around digital record keeping and digital links can be challenging and something that many businesses unintentionally overlook.

For example:

• Often businesses are unaware they are still using ‘copy and paste’, which only comes to light after a detailed review, and are unaware they are not compliant
• For expenses on which VAT is irrecoverable, recording the ‘gross’ cost, rather than separating out the ‘net’ and VAT values, creating a digital record keeping error
• Transactions that are only recorded in the GL, e.g. direct debits, misc cash sales etc, are typically not handled in a MTD compliant manner
• Treatment of the purchase of overseas services which need to be reverse charged are often overlooked.

With confirmation of the penalty regime that will apply to MTD errors, the emphasis is now on businesses to be confident that they are compliant.

If you are not confident with your MTD compliance status or would like a sense check over your current processes then RSM’s MTD digital link and process review could be useful.

Disclaimer: This information is provided in good faith, however, all business decisions should be taken in conjunction with your legal, professional and financial advisors.