The online VAT facility is being withdrawn for 800 businesses that should now be complying with Making Tax Digital (MTD) for VAT. This measure is being taken to compel those that should be signed up to MTD to do so at their earliest opportunity.

An HMRC spokesperson commented: “In July we wrote to approximately 800 VAT registered businesses above the VAT threshold who have not yet complied to remind them that they need to sign up to MTD and that, for them, the existing online VAT return facility would be closed on 7 October 2021 – the date their August VAT return will be due.

We have continued to provide clear instructions advising these businesses that in order to continue submitting their VAT returns, they should sign up to MTD, ensure they are keeping digital records and submitting their VAT returns via MTD compatible software.”

Businesses above the VAT threshold of £85,000 have been required to use the MTD service and to maintain digital accounting records since April 2019. HMRC reports that 89% of traders that are obligated to sign up to MTD for VAT have now done so. However, around 100,000 businesses have yet to join MTD and are still submitting their VAT returns online.

The next milestone for MTD is April 2022, where the scheme will be extended to all VAT-registered businesses with a taxable turnover below £85,000.

Timeline for Making Tax Digital

  • April 2022: MTD is mandatory for all VAT-registered businesses and organisations, regardless of turnover;
  • April 2024: Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is mandatory for the self-employed and those with income from property. This will apply to those with turnover and gross rental income of over £10,000;
  • April 2025: MTD ITSA is mandatory for general partnerships – this will not include limited liability partnerships, mixed or corporate partnerships. This date has not been set in legislation.
  • April 2026 (at the earliest): MTD for Corporation Tax. This date has not been set in legislation.

Penalties for late submission

The government has introduced new late submission penalties for those taxpayers that regularly miss their submission obligation for VAT and ITSA. A submission obligation could be a return or an MTD regular update – the penalty scheme will not apply to other occasional submissions.

Instead of receiving an automatic financial penalty, points will be issued for missed obligations before the financial penalty is levied. Taxpayers will receive a point every time they miss a submission deadline. HMRC will notify them of each point. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified.

The changes will apply to VAT customers for accounting periods beginning on or after 1 April 2022, to ITSA customers with business or property income over £10,000 per year (who are mandated for MTD for ITSA) from the tax year beginning 6 April 2024, and for all other ITSA customers from the tax year beginning 6 April 2025.

Further details on the new penalties for late submission can be found here.

With the introduction of more stringent measures to ensure MTD compliance and the new penalty system coming into play, it is important that you understand your MTD responsibilities. Should you have any queries on the topics discussed above, please get in touch with your usual M+A Partners contact, speak to me on 01953 452077 or email

Written by

Mary-Anne Sargeant

Mary-Anne Sargeant has been the Partner of our Attleborough office since 2010. Mary-Anne and her team provide professional accountancy and tax advice for a broad spectrum of clients, from brand new start-ups to well established family and owner managed businesses and from private individuals to companies.

Find out more about our Attleborough office by downloading our factsheet below.