The ATT suggests that HMRC modernise its approach to penalties to encourage compliance with tax rules rather than punish those who unintentionally get it wrong – especially when it comes to complying with new tax reporting obligations such as under the relatively new MTD for VAT.

Under MTD, VAT-registered businesses must keep digital records and use MTD-compatible software to submit their VAT returns.

published HMRC guidance outlines the penalties which businesses face for failing to meet these requirements,, which is an interim regime until a new penalty scheme for MTD is introduced from 1 January 2023.

The temporary penalties include: