About 80,000 businesses missed the deadline to file a digital tax return this month, but escaped a fine from HM Revenue & Customs after the tax authority decided to be lenient.
The new Making Tax Digital (MTD) initiative, which requires firms that turn over more than £85,000 to file their VAT returns online, has been plagued by delays and complaints from bosses.
A pilot scheme launched before the system was introduced in April attracted far fewer volunteers than expected, while many business owners complained that they had to pay to upgrade their software to comply with the new rules.
A mandatory deadline for the first companies scheduled to file online returns passed on September 7. About 230,000 businesses had complied by then, but as many as 80,000 had not.
HMRC could have netted tens of millions in fines from the businesses that had not signed up in time, but chose to deploy a “soft touch” approach, according to officials. HMRC said it would continue with its lenient approach, but would still consider sanctions in cases of deliberate non-compliance.
After a rocky start to the staggered rollout, the number of firms embracing Making Tax Digital is starting to increase. More than 1.1m have started using the online system. Fines range from £100 to £400, depending on a company’s turnover.
HMRC said: “We are delighted that more than 1m businesses are now signed up to the service and submitting their VAT returns through Making Tax Digital. It has always been recognised that it is a big change for some and we are committed to helping businesses through the transition rather than penalising them.”