The tax authority has written to agents and accountants informing them that the existing transition arrangements will end in the next three weeks and any company that is using the old system will be automatically signed up for a MTD VAT account.

From 15 May 2023 all VAT-registered businesses will have to use Making Tax Digital (MTD) compatible software to keep their VAT records and file their VAT returns.

HMRC chief executive Jim Harra said: ‘To make it quicker and easier for businesses to manage their tax affairs, we’ll sign up all remaining businesses to MTD, unless your client is exempt or has applied for exemption and is awaiting a response from us.’

It is important for businesses to take action as soon as possible or they could face a penalty.