Taxman shows businesses ‘no-deal leniency’ over making tax digital deadline


About 120,000 businesses that missed a tax deadline will escape a fine after HM Revenue & Customs said that it would show leniency before a possible no-deal Brexit.

The tax authority could have issued cumulative fines running into tens of millions of pounds after one in four companies failed to comply with new online filing rules in time. Officials said that they would not levy penalties because businesses may be “fully focused” on leaving the European Union on October 31.

HMRC said that it wanted to support businesses through the transition to “making tax digital”, a change that obliges companies to file VAT returns via software. The policy is designed to reduce avoidable mistakes in tax returns that cost taxpayers an estimated £9.9 billion last year. Its implementation has proved contentious with MPs and business groups saying that many of the 1.2 million affected companies were not ready.

About 490,000 companies with sales above the VAT threshold of £85,000 were supposed to file by August 7.

Richard Wild, head of the tax technical team at the Chartered Institute of Taxation, said that some businesses, or their agents, had faced “significant” difficulty complying, while HMRC’s phone lines had been “swamped” with people seeking support. He said that the non-compliance rate was therefore “high, but not surprising”.

Fines range between £100 and £400. The government said in February there would be a “light touch” approach to penalties, but this is the first time that the tax office has said that no fines will be issued.

Jim Harra, deputy chief executive of HMRC, said: “Our ambition is to help businesses to get it right, not to penalise them.”

The Federation of Small Businesses welcomed the move, but said that the grace period should be extended.

Michael Gove, the minister in charge of no-deal planning, told business groups last week that HMRC would be ordered to be supportive of viable companies that were struggling in the event of a no-deal Brexit.