Soft-landing period for MTD for VAT extended to April 2021

HM Revenue & Customs (HMRC) has announced that the second phase of Making Tax Digital for VAT will now be postponed until 1 April 2021.

The first year of MTD was subject to a one-year “soft-landing period”, which has seen HMRC holding back from pursuing businesses that should have signed up.

Similarly, HMRC has taken a lenient approach in cases where businesses that have signed up to MTD have had problems with making their first returns for whatever reason.

However, from 6 April this year, this soft-landing period was due to come to an end. The latest announcement from HMRC in response to the COVID-19 pandemic means that businesses now have until their first VAT return period starting on or after 1 April 2021 to put the necessary digital links in place and comply with the MTD rules fully.

The change also means that penalties for failing to report VAT via MTD will also be postponed. These fines could have been up to £400, depending upon the size of the business.

Despite the changes to the rules, it is important that businesses still prepare themselves for MTD for VAT. If you haven’t taken action already to become compliant, it is important that you do so now.