HMRC confirms MTD penalties from 1 November 2022

Accountancy firms have been informed by HMRC that the “soft landing” penalty waiver for Making Tax Digital for VAT will be removed from 1 November 2022.

All businesses that file their VAT returns monthly or quarterly must now sign up to Making Tax Digital (MTD) and use MTD-compatible software to keep their VAT records and file their VAT returns.

Penalties may apply if customers are not following the correct process to file their VAT returns using MTD-compatible software from 1 November.

The amount businesses may be fined is dependent on their turnover. A penalty applies to each return filed incorrectly, and the penalty will be:

• £100 if turnover is below £100,000;
• £200 if turnover is between £100,000 and £5,600,000 inclusive;
• £300 if turnover is between £5,600,001 and £22,800,000 inclusive; and
• £400 if turnover is £22,800,001 or above.

*If clients are already exempt from filing VAT returns online (though these exemptions are very rarely approved by HMRC), or if they or their business are subject to an insolvency procedure, they are automatically exempt.

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