The error is caused by a field TestMode which submits the report to https://secure.dev.gateway.gov.uk which is used as "Test Website" for online submission and not the actual HMRC website.
To resolve this, perform the following steps:
1. Navigate to Setup > Customization > Record > Record Types
2. On the Row for VAT Online Configuration, clicked the List link.
3. Filter from Bundle = 14864
4. Edit "TestMode" of the GB Country Code
5. Go to More Options>Delete
Also make sure that if submitting Quarterly, Tax Period From and To is set to Quarters. ex: From= Q2 2014 To=Q2 2014