Making Tax Digital for VAT - 25% fail to sign up on time and get a nudge

On 18 September 2019, HMRC updated professional bodies and other stakeholders on the progress of the Making Tax Digital (MTD) for VAT service. 1.1m businesses have now signed up to MTD for VAT and the number of returns filed through the service has reached 1.2m.

Approximately 486,000 stagger group 1 businesses (quarterly filers who use calendar quarters) are mandated to comply with MTD for VAT; 76% of these businesses signed up in advance of the 7 August 2019 deadline for filing their first return and a further 5% have signed up since then. This means that there are about 92,000 stagger group 1 businesses that have yet to sign up.

Of the approximately 310,000 stagger group 2 businesses that are mandated to comply with MTD for VAT, 74% signed up in advance of the 7 September 2019 deadline for filing their first return, leaving about 80,000 stagger group 2 businesses that still need to sign up.

Of the stagger group 1 and 2 businesses that have signed up to MTD for VAT, 94% went on to successfully file their first MTD for VAT return by the relevant deadline which means that about 48,000 missed the deadline.

The focus will now be on stagger group 3 businesses who need to sign up in advance of the 7 October deadline for their first mandatory MTD for VAT return; 60% of these businesses have already signed up.

HMRC is continuing its programme of sending nudge letters and emails and is adhering to the undertaking not to penalise businesses that are doing their best to comply. The Tax Faculty is aware that these letters are sometimes being received by businesses that have complied or are not required to do so at this stage.

For more about nudge letters, read the cover story from the September edition of TAXline, HMRC's use of nudge theory on taxpayers, in which Angela Clegg gives her views on HMRC’s use of the nudge theory to encourage taxpayers to act in a certain way.

Further information on MTD is available on www.icaew.com/mtd

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