HMRC dismisses late tax return fines for struggling small business owners

For the second time in two months, thousands of businesses have escaped late penalties on their tax return.

 A lot of small businesses have had a hard time moving to Making Tax Digital

A lot of small businesses have had a hard time moving to Making Tax Digital

Around 80,000 businesses have avoided a fine for missing the digital tax return deadline on September 7.

The new Making Tax Digital scheme has been riddled with delays and other issues, with business owners complaining that they’ve had to pay t0 upgrade their software so that they comply with the new rules.

HMRC is applying a ‘soft touch’ approach to penalties, but would still consider them in cases of deliberate non-compliance.

Businesses who missed first tax return deadline also spared HMRC fine

The taxman also waived fines for around 120,000 businesses who didn’t meet the first Making Tax Digital deadline on August 7.

A significant one in four businesses failed to file on time, meaning that HMRC could have issued tens of millions of pounds worth of fines. Officials said that they wouldn’t issue the penalties because businesses are ‘fully focused’ on exiting the EU come October 31.

Fines sit between £100 and £400 (linked to the gross turnover of the business) but the Government did say back in February that there would be a “light touch” approach to penalties, but this is the first time no fines have been issued.

The move comes amid a series of leniency measures to help businesses ahead of a possible no-deal Brexit.

MTD bothersome for businesses

HMRC said that it wanted to help businesses transition into Making Tax Digital, supporting the 490,000 companies with sales above the VAT threshold of £85,000 who were due to file by August 7.

Though some missed the deadline, nearly a million businesses registered for MTD beforehand and 900,000 VAT returns were successfully submitted through the service.

Deputy CEO of HMRC, Jim Harra, said: “We are very pleased that nearly a million businesses have signed up and thank them for joining.

“Our ambition is to help businesses moving to MTD to get it right, not to penalise them. HMRC’s decision not to enforce penalties will help businesses transition to MTD without fear of getting it wrong.”

Conservative MP Michael Gove is in charge of no-deal planning and has informed business groups that HMRC would be ordered to be help businesses that were struggling as a result of a no-deal Brexit.

If you’re having trouble with the transition to Making Tax Digital, read over our guide on Making Tax Digital bridging software.

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