HMRC is taking a tougher approach to traders that should have signed up to Making Tax Digital for VAT including a trial of closing their access to online VAT returns. ICAEW’s Tax Faculty explains the steps that are being taken.
Almost 90% of those that should have signed up to Making Tax Digital (MTD) for VAT have done so but around 100,000 have not. All these businesses have received more than one letter from HMRC reminding them of their MTD obligations.
HMRC has the power to charge a penalty of up to £400 for filing a VAT return other than by using MTD software and is considering using this power.
In the meantime, it is preparing for another, rather more drastic, option which is to close the online VAT return to those that have not signed up to MTD for VAT and should have.
This would mean that the business could not file their VAT return other than by using MTD software.
HMRC is writing to 800 selected traders to tell them that while they will be able to file their March/April/May 2021 VAT return by 7 July 2021 using the online VAT return, they will not be able to file subsequent returns in this way.
They will be blocked from filing the June/July/August 2021 return using the online VAT return and will need to sign up to MTD in good time to file that return using MTD software, by 7 October 2021.
HMRC intends to monitor the response to this approach before considering whether to use it more widely.
Hear more at Virtually Live!
ICAEW's flagship digital conference returns for 2021 and includes sessions on tax. Hear from experts including Rebecca Benneyworth and ICAEW's Anita Monteith.
More support on tax
ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.Sign up for TAXwireJoin the Tax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.