In a bid to improve Making Tax Digital for VAT compliance, HMRC will remove the ability to submit online VAT returns for some businesses that should have signed up for it.

From April 2019, most VAT registered businesses with a turnover above the VAT registration threshold were required to join Making Tax Digital for VAT or Making VAT Digital (MVD). 

  • HMRC have identified that around 10% of such businesses continue to file their VAT returns online rather than through MVD compatible software. 
  • Of these 100,000 businesses, 800 traders exceeding the registration threshold were randomly selected. HMRC wrote to them in May 2021 reminding them of the requirement to sign up for MVD.
  • In order to encourage compliance, HMRC will now withdraw access to the online VAT return facility for those selected businesses meaning they will be unable to file their August 2021 quarter VAT returns by 7 October 2021, unless they have signed up to MVD.

If this approach is successful in improving MVD compliance, HMRC may use it more widely.

HMRC can charge a Penalty of up to £400 where businesses that are required to report via MTD file a VAT return by non-MTD means.

Useful guides on this topic

Making Tax Digital: VAT (subscriber guide)
What is Making Tax Digital (MTD) for VAT? What is VAT 'functional compatible' software? What do you need to report their VAT? Are there penalties for making mistakes?  

Penalties (VAT)
When do penalties apply for VAT? What penalties are charged and how can they be mitigated?

Registering for VAT
When should a business register for and charge VAT? What are the VAT registration limits and VAT rules after Brexit? What penalties might HMRC issue for late notification of registration?



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