Around 100,000 VAT-registered businesses have yet to register for Making Tax Digital for VAT, the latest figures have revealed.
The research comes after HM Revenue & Customs (HMRC) wrote to businesses reminding them of their obligations.
According to the compliance letter, the tax authority will begin ramping up enforcement activity in the current tax year – with multiple options at its disposal.
This includes a penalty of up to £400 for filing a VAT return other than by using MTD software, as well as closing the online VAT return portal to those that are required to sign up to MTD for VAT – effectively leaving businesses with no other option than to complete their VAT return using the new service.
The compliance letter warns that up to 800 traders will be affected by the latter measure, meaning they will be able to file their March to May 2021 VAT return by 7 July 2021 using the online VAT return, but will not be able to file subsequent returns in this way.
Commenting on the report, the Institute of Chartered Accountants in England and Wales (ICAEW) said almost 90 per cent of traders have now signed up to MTD for VAT, but businesses who have not should take urgent action.
“HMRC is taking a tougher approach to traders that should have signed up to MTD for VAT including a trial of closing their access to online VAT returns,” said the regulator.
“All these businesses have received more than one letter from HMRC reminding them of their MTD obligations.”
Under Making Tax Digital legislation, any business with a taxable turnover of more than £85,000 (the current VAT threshold) must sign up for MTD for VAT and file returns electronically using MTD-compliant software.
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