Making Tax Digital: HMRC confirms ‘soft landing’ on penalties

Businesses using Making Tax Digital to file with HMRC will be granted a ‘soft landing’ for late filings in the first 12 months of the project’s operation, the tax authority has said

Theresa Middleton, HMRC director of business customer and strategy confirmed the moratorium to CCH Daily and added that HMRC plans to consult further on penalties in the spring.

In a response to consultations, HMRC said it recognised that ‘more work needs to be done’ on penalties and added it will ‘look again at this’.

‘We can confirm that in order to support customers during the transition to Making Tax Digital for Business, customers will be given a period of at least 12 months before they are charged any late submission penalties,’ it said.

In its summary of responses to the Bringing business tax into the digital age consultation, the government noted the concerns of businesses about the need for time to submit updates and the desire ‘not to create work peaks’.

However, it said updates are intended to be quick submissions of receipts and expense data that reflect the trading recorded in a business's records.

The month’s submission period is not, it said, intended to be a ‘lengthy window of time in which a business starts to enter all its transactions in the digital records from paper’.

‘If a business has been keeping digital records “as they go”, the update should be straightforward to generate and send,’ the response said. ‘A one month deadline seeks to strike a balance between the regular updating of timely information while still allowing businesses a time interval after the end of their period in which to enter any final transactions, make any adjustments they may wish to make and find a convenient time to submit the update.’

The one month deadline would also apply to VAT updates, it added.

CIOT president Bill Dodwell said: ‘The good news is that the government has clearly listened to some of the concerns expressed by respondents. The ‘soft landing’ on penalties for late submissions is a sensible proposal.

‘Moving the UK to a digital tax system will undoubtedly bring benefits but the scale of the change is so significant that it would benefit from being carefully phased in. A phased introduction would give small and medium-size businesses sufficient time to prepare for the significant administrative, technological and financial implications associated with the shift to digital accounting. Getting this done quickly is less important than getting it done right.’

Consultation responses can be read here.

Calum Fuller |Assistant editor, Accountancy magazine (up to 2018)

Calum Fuller is former assistant editor of Accountancy magazine and Accountancy Daily, published by ...

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