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  • HMRC has announced that a new points-based system for MTD non-compliance is likely to be introduced, although further details are yet to finalised. This is in addition to the existing VAT penalties regime for late payment.

    Points will be applied each time a MTD report is submitted late. This could be potentially problematic for taxpayers with multiple businesses (for example, those with, say, both a trading business and a lettings business, as they will be required to submit separate MTD reports for each business on time).

    If the taxpayer reaches their MTD points threshold, they will then become liable for financial penalties. In some situations, it may be possible to appeal against points and penalties, but this is expected to be successful only in limited and exceptional circumstances.

    The new penalty points system is not expected to be applied until 2020, but those businesses who do not comply run the risk of reputational damage to their track record and relationship with HMRC. In addition, it is still uncertain as to whether the current VAT surcharge system will apply to VAT returns submitted under MTD within that “soft landing” period of 2019/20.

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