HMRC have published the latest Making Tax Digital update for agents. We have also received another MTD VAT service progress update from HMRC which we share below.

“Another month and more milestones reached in the rollout of MTD for VAT.

As part of our commitment to keeping you updated on how the service is progressing and how you contribute to these results, we wanted to share the headlines of recent weeks and what is planned for the coming weeks.

As August drew to a close over a million VAT businesses had signed up to MTD and submissions for the first time exceeded the number of sign-ups. Currently there are over 1.1 million businesses signed up to the VAT service, with over 1.2 million submissions having been received.

In the period leading up to the stagger 2 filing deadline on 7 September the service performed exceptionally well in handling high volumes of traffic. Almost 170,000 VAT returns were filed in the peak week leading up to the 7 September alone, with many thousands more filed in the weeks before that.

Over 230,000 mandated stagger 2 businesses (74%) have now signed up. We will shortly be writing to the 80,000 businesses in stagger 2 who still need to sign up to remind them of their obligations and the need to take action now. This approach has delivered positive results in encouraging sign-ups from the monthly filers and the stagger 1 cohort.

The number of stagger 1 businesses signing up to the service also continues to increase. Since the 7 August deadline, our nudge letters have helped encourage a further 5% of businesses to sign up to the service. Over 80% of this mandated population is now signed up and actively using the service.

By 7 October, stagger 3 businesses are due to file their first VAT return through MTD. Currently 60% have signed up to the service. To encourage further sign-ups and in turn submissions by this date, we will be sending nudge emails to those businesses who still need to sign up.

Sign-ups remain our lead indicator for monitoring compliance with the new MTD rules, as by signing up businesses are signalling their intention to comply. We have received feedback that people would also find it useful to know what proportion of those who have signed up file their returns on time through MTD. Of the stagger 1 mandated group, 94% filed by their 7 August deadline. For the stagger 2 mandated group, 94% filed by their 7 September deadline.

We are continuing to focus our support for businesses in helping them to move to MTD and get it right. We will not unnecessarily penalise businesses who are doing their best to make the transition.

With almost 300 telephony staff dedicated to MTD, the VAT helpline continues to perform well. The wait times overall, and especially around key filing dates when demand is at its highest, have remained within the 5 minute average wait time for August and September.

For the vast majority of business and agents the service works as intended with good feedback on customer experience. However for a very small minority the experience hasn’t been as we had intended and for which we apologise. We continue to make strong progress in resolving issues as quickly as possible and we are using that learning to improve the services we offer going forward, to provide a positive customer journey for everyone.

Whilst we continue to closely monitor the service, we welcome your continued assistance in helping us understand where further improvements could be made. The success of MTD for VAT is testament to the close working relationship HMRC has with all our stakeholders.

The government has confirmed a light touch approach to penalties in the first year of implementation of MTD VAT. Where businesses are doing their best to comply, no filing or record keeping penalties will be issued.

The department’s main priority is to support taxpayers to transition to MTD smoothly, so it will not penalise businesses, instead we will send them a letter encouraging them to join without further delay [where businesses failed to sign up in time for their first MTD filing deadline].

We are trialling two different approaches based on compliance and behavioral insight. For each approach, there are two versions of the letter – one includes a disclaimer for businesses where the information we hold suggests their taxable turnover may be below the VAT registration threshold.

Following feedback on the letter issued to monthly filers, we have amended the letter to make the disclaimer more prominent – it is now at the outset.

Sanctions will remain possible in cases of deliberate non-compliance, and in order to safeguard VAT revenue.”