The Cost of Non-Compliance: Understanding Making Tax Digital Penalties
A question we get asked by clients when we talk about Making Tax Digital (MTD) is will the penalties change? The answer to that question is yes there was a penalty system introduced on January 1, 2023 which includes new penalties if you fail to meet the MTD requirements.
Penalties:
Failing to keep required information ‘digitally’ could result in a penalty of between £5 to £15 for each day on which you don’t meet this requirement, depending on the level of non-compliance.
Under these new rules, businesses or individuals will receive a ‘point’ every time their submission deadline date is missed. Points are given for late submissions. Reaching a certain number of points results in a £200 fine.
- For Annual Submissions: 2 points will result in a penalty
- For Quarterly Submissions: 4 points will result in a penalty
- For Monthly Submissions: 5 points will result in a penalty
Points do expire after two years, starting from the month following the penalty, however points don’t expire when you have reached the penalty threshold. Reaching the penalty threshold incurs a £200 fine, with additional fines for subsequent failures.
HMRC is also introducing a new late payments penalty system:
- Up to 15 days after payment was due: no penalty
- Day 30 after the payment was due: 2% of the amount
- Day 31 after payment was due: 2% of what was due on day 15, PLUS 2% of what was due on day 30
- From day 31 onwards: 4% of the outstanding amount, applied daily
Penalty Waivers:
Taxpayers can appeal points and penalties, but HMRC’s decision depends on the provided excuse and follows published guidance.
Hope this helps you grasp the essence of MTD penalties. Still feel you need more support? Get in touch now for a free consultation.