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Making Tax Digital - 18-Month Re-authorisation Rule

Under Making Tax Digital (MTD) guidelines, HMRC requires every VAT-registered entity to digitally re-authorise the connection between their accounting software and HMRC every 18 months. To renew this link, a user must physically log into the council's Government Gateway account.

 The Risk to Councils: A high volume of late submissions occur when a Clerk, RFO, or Finance Officer leaves the council, and their replacement or colleagues do not have the credentials or access rights to the primary Government Gateway account. When the 18-month window expires, the digital link breaks, software submissions fail, and a late submission is automatically triggered while the council scrambles to recover account access.


How HMRC’s Late Submission Penalty System Works


Under HMRC rules, local authorities face the exact same penalty framework as regular businesses. This applies even if the council is submitting a nil return or a Section 33 repayment return.
As outlined by HMRC guidelines: 

"You must send a VAT Return by the deadline for your accounting period... Late submission penalties work on a points-based system. For each return you submit late, you’ll receive a penalty point until you reach the penalty point threshold. When you reach the threshold, you’ll receive a £200 penalty." (Source: GOV.UK / VAT Late Submission Guidance)

  • Points accumulation: Every missed or late deadline adds 1 penalty point to the council’s record.
  • The Financial Trigger: If the council files monthly, the threshold is 5 points. If filing quarterly, the threshold is 4 points.
  • The £200 Fine: Once that threshold is reached, a £200 fine is automatically issued. Furthermore, every single late submission after that threshold triggers an immediate, additional £200 fine until a period of perfect compliance resets the clock.

Proactive Steps for Your Council


To ensure continuity of VAT compliance and prevent unnecessary administrative gridlock, councils are strongly recommended to take the following actions:

  1. Verify Gateway Access: Ensure that multiple individuals or a secure, shared council email address have administrator access to the HMRC Government Gateway account. Do not rely on a single person's individual login credentials.
  2. Check the MTD Link Status: Log into your accounting software to verify when the 18-month authorization token is next due to expire.
  3. Include VAT in Handover Checklists: Ensure that Government Gateway login details and VAT submission procedures are explicitly documented in Clerk and RFO handover handbooks.