Taxman shows leniency to 80,000 MTD businesses

The taxman has shown his lenient side to some 80,000 businesses who were meant to file their VAT digitally this month but didn’t -- by choosing not to penalise them.

It means that, in line with its pledge to take a “light touch” on MTD penalties, HMRC waived fines for the 35% of firms with digital tax accounts who missed their September 7th filing deadline.

The rare show of HMRC leniency comes as other firms on £85,000-plus in sales, whose VAT quarter started in June, are being reminded to register by September 26th to meet their October 7th deadline.

Should they be without an accountant, firms needing to directly sign up for VAT under MTD need an email address, their VAT details and an ‘additional identifier,’ a chartered tax body advises.

And the advice should potentially be heeded because although HMRC’s promise is that it will not fine traders “doing their best to comply” with MTD, sanctions aren’t totally off the table.

In fact, penalties “remain possible” in cases of what the Revenue deems “deliberate non-compliance”, the department said in July and has reiterated since.

However, “many businesses are [still] not sure what they need to do to comply” with MTD, believes James Foster of First Freelance, which is offering resources to the uncertain.

He added: “The digitalisation of the VAT process is part of a government drive to help small businesses manage their tax affairs better, but it's received plenty of criticism.”

Firms having to pay for MTD-compliant software, delays to the MTD rollout and slow take-up of the pilot are among those criticisms, and are seen by some to explain the taxman’s leniency.

The Institute of Chartered Accountants in England & Wales says: “HMRC is continuing its programme of sending [MTD] nudge letters and emails and is adhering to the undertaking not to penalise businesses that are doing their best to comply.

“[However we are] aware that these letters are sometimes being received by businesses that have complied or are not required to do so at this stage.”