More than 120,000 VAT-registered businesses in the UK missed the August deadline to file returns through Making Tax Digital (MTD).
HMRC confirmed that around 116,000 businesses with quarterly obligations and 5,000 firms that file monthly returns did not sign up in time.
Most VAT-registered businesses with annual taxable turnover of more than £85,000 have to keep digital records for periods starting on or after 1 April 2019.
Usually, non-compliant businesses would expect a fine of up to £400 for missing their VAT return deadline.
But HMRC is adopting a light-touch approach to penalties until 1 April 2020, to give businesses enough time to adjust.
More than a million firms have been mandated so far, including around 200,000 businesses with turnover below the £85,000 VAT-registration threshold.
Jim Harra, deputy chief executive at HMRC, said:
"We are very pleased that over 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."
Talk to us about MTD for VAT.
