Businesses can currently use HMRC’s online service to submit their VAT returns, but this closes on November 1. From then on, returns can only be filed using software compatible with Making Tax Digital (MTD) VAT.
ICAEW said that with weeks to go, some 55% of businesses below the VAT threshold of £85,000 of taxable turnover were yet to join MTD.
The businesses above this threshold have been required to comply with MTD rules since 2019, but one in 10 have not done so.
ICAEW is urging all businesses to take action to comply with MTD VAT or risk incurring default surcharge or, from January 2023, late submission penalties or late payment penalties and interest.
Submitting an online VAT return will only remain available for businesses with a digital exclusion exemption agreed with HMRC.
Caroline Miskin, Senior Technical Manager Digital Taxation, ICAEW, said:
“Within weeks businesses won’t be able to use HMRC’s online VAT return and could face penalties, so it’s important they take action to join MTD VAT by 1 November.
“HMRC has so far been patient with businesses that should have signed up to MTD VAT in 2019, but smaller firms with taxable turnover below £85,000 are being given much less time to comply.
“We’re concerned that some companies won’t be able to sign up and we’d encourage any business that needs an exemption to apply as soon as possible.”