HMRC to step up MTD VAT compliance

HMRC will be taking a tougher approach to traders that should have signed up to Making Tax Digital for VAT, including a trail of closing their access to online VAT returns.

It is understood that around 100,000 businesses that should have signed up to Making Tax Digital (MTD) for VAT have not done so, despite HMRC reminding them of their MTD obligations on several occasions.

Therefore, HMRC are now considering using their power to charge a penalty of up to £400 for filing a VAT return by other means than using MTD software.

In the meantime, HMRC are preparing to close the online VAT return to those that are still not compliant with MTD for VAT, meaning businesses would not be able to file their VAT return other than by using MTD software.

HMRC will be writing to 800 selected traders to inform them that they will be able to file their March/April/May 2021 VAT returns by 7 July 2021 using the online VAT return but will not be able to file subsequent returns in this way.

HMRC intend to monitor the response to this approach closely before considering whether to use it more widely.