Some 120,000 businesses did not sign up in time to make their first MTD for VAT filing. However, in line with HMRC’s ‘light touch’ approach, they will not be penalised and will instead receive emails and letters aimed at ushering them through the digital tax doorway.
According to figures released by HMRC this week, approximately 490,000 businesses were required to file their first MTD VAT return by the deadline of 7 August: around 370,000 of them signed up in time and 120,000 did not.
A spokesperson told AccountingWEB that this was “in line” with the Revenue’s expectations and the proportion of monthly VAT filers who joined ahead of 7 June.
Nearly a million businesses registered for MTD before the August deadline and some 900,000 VAT returns were submitted successfully through the new service.
HMRC advised businesses that didn’t make the August deadline to file their return as they have done previously, such as via the VAT portal.
The majority of VAT-registered businesses with turnover above the VAT threshold were required to keep their records digitally for periods starting on or after 1 April 2019, sign-up to the service and submit their first quarterly return to HMRC direct from software by 7 August.
While under normal circumstances, non-compliant businesses could have expected a fine of up to £400 for digital tax foot-dragging, HMRC has stated that it will be taking “a light touch” to penalties in the first year of MTD mandation.
The Revenue puts this softly-softly approach down to a wish to help businesses with the transition especially at a time when they are fully focused on preparations for leaving the EU on 31 October.
HMRC will not issue filing or record keeping penalties where businesses are doing their best to comply. However, according to Revenue guidelines sanctions will remain in cases of “deliberate non-compliance” in order to “safeguard VAT revenue”.
In a statement HMRC’s deputy CEO Jim Harra said: “Our ambition is to help businesses moving to MTD to get it right, not to penalise them. HMRC’s decision not to enforce penalties will help businesses transition to MTD without fear of getting it wrong.”
Letters to latecomers
Instead of penalties, HMRC is instead in the process of sending email reminders to businesses yet to register with the new programme. It will also send letters to those that missed the first filing deadline.
The letters will point latecomers to the MTD regime to HMRC’s customer service channels, including its webinars and online guidance, which can be found on GOV.UK, and walkthrough videos on YouTube.
While the tax authority confirmed back in February that it will be taking a light-touch approach to penalties during in the first year of Making Tax Digital, under the current regime penalty levels are linked to the gross turnover of a VAT-registered business and are laid out as follows:
Total Turnover = £22,800,001 and above then the maximum penalty is £400
Total Turnover = £5,600,001 to £22,800,000.99 then – £300
Total Turnover = £100,001 to £5,600,000.99 then - £200
Total Turnover = £100,000.99 and under then - £100
Businesses can sign up for MTD on GOV.UK. If paying by Direct Debit, businesses should sign up at least seven working days before a return is due. If not paying by Direct Debit, businesses should register at least 72 hours (three days) before their return is due.