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If you were among the 3,800 small businesses who missed the first Making Tax Digital quarterly deadline for filing their VAT return on 7th August, there are steps you can take to become compliant.

As HMRC’s Making Tax Digital (MTD) initiative gathers pace, those among the first affected were small businesses with annual incomes above the current £85,000 VAT registration threshold. Those small firms who registered before 1st April 2019 with a June quarterly VAT return, had to file it by 7th August.

To comply with MTD, small businesses must keep their VAT records digitally from 1st April, and submit their VAT returns using functional compatible software. This applied to the first VAT return period starting after 1st April 2019.

If you pay by Direct Debit and missed the MTD registration window, HMRC have confirmed you will not be penalised on this occasion. This news came on the back of MTD confirmation emails were not being issued within 72 hours. HMRC have said they would write to businesses they believe should have filed an MTD VAT return by 7th August 2019.

What should I do if I missed my MTD filing deadline?

If you pay HMRC your VAT by Direct Debit and were due to file your first MTD VAT return by 7th August 2019, the steps you need to take to get your affairs back in order are as follows:

  • If you haven’t already, file your VAT using your current method.
  • Wait for the Direct Debit to be collected from your bank account. Once the payment has gone, you can register for MTD for VAT.
  • Authorise your software with HMRC. This process varies depending on the software package you’re using so check with your software provider.

Now you should be ready to submit your first MTD VAT return for the September 2019 quarter.

A late MTD VAT return = Late VAT payment

Filing the VAT return is the trigger for the Direct Debit to be taken. As a result, if you file your VAT return late, your VAT payment will also be late.

Direct debit payments are taken either three working days after the payment deadline (if the return is filed on time) or three working days after the date the VAT Return is filed (if late).

If you pay late as a result of filing late, you could incur a default surcharge. You may have grounds to appeal if you can prove you have a “reasonable excuse”, for example software issues or problems with HMRC’s systems. However, HMRC have not provided any examples of what it will class as a reasonable excuse for MTD purposes and Association of Taxation Technicians warned recently: “Businesses which do not pay their VAT, or pay late, remain exposed to penalties in the normal way.”

Penalties for filing an MTD return late

HMRC has made it clear that it will be lenient with any business that misses the 7th August deadline, as long as they can show they have tried to comply. Theresa Middleton, Director of Making Tax Digital at HMRC, stated: “During this first year we won’t be issuing filing or record keeping penalties to businesses doing their best to comply.”

That is why those affected still need to make sure that they try to comply as fully as possible even if they have missed the deadline. Therefore, whatever stage a small business has reached in the process, they need to ensure:

  • They understand the rules and what they need to do
  • They have MTD compliant software in place, so the transition process runs as smoothly as possible
  • Their accountant or bookkeeper understands MTD and can guide them throughout the process
  • Register for MTD as soon as possible to file any outstanding VAT returns due under these new rules

Contact us for MTD for VAT support

At TaxAssist Accountants, we have spent considerable time developing the right support services to help small businesses comply with Making Tax Digital and can help you get back on track if you have missed the deadline or are about to start your MTD journey.

For a free initial consultation about your MTD for VAT obligations, call us today on 0800 0523 555 or email us with your concerns via our online enquiry form.

Date published 23 Aug 2019 | Last updated 22 Sep 2020

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.


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