Despite 120,000 businesses quoted as having missed the August tax deadline, Her Majesty’s Revenue and Customs (HMRC) is deploying a light touch to penalties and not issuing any fines.

HMRC said it would show leniency for businesses adjusting to the new Making Tax Digital (MTD) system for VAT, and will continue this approach in the face of a possible no-deal Brexit.

Sean McGinness, VAT partner at Saffery Champness LLP and a member of the firm’s Landed Estates and Rural Business Group, said: “An estimated one in four VAT-registered businesses has so far failed to comply with the new online filing rules that came into effect in April. HMRC estimates that 490,000 VAT-registered businesses with sales above the VAT threshold of £85,000 should have been filing under the new system by 7 August.

“However, it is known that there have been a number of difficulties encountered with the new system, and higher-than-average calls to an overworked HMRC helpline by concerned taxpayers struggling to make their returns on time.

"However, businesses should not take this as a green light to do nothing and must continue to file and pay their VAT. Penalties for non-payment can be up to 15% of the VAT liability due.”