More needs to be done to make businesses aware of Making Tax Digital says ICAEW
Thursday 13 September 2018, Research by ICAEW has revealed that over 40% of businesses about to be affected by Making Tax Digital (MTD) for VAT are not yet aware of it. This is despite the changes being mandatory for most VAT registered businesses from April 2019. The survey also shows that although there has been a significant increase in the number of businesses now using accounting software, a quarter of all businesses are still using a paper based accounting system – unchanged from two years ago. Paper based records will not be permissible for MTD for VAT.
From 1 April 2019, MTD for VAT will become compulsory for VAT registered businesses making annual taxable supplies of over £85,000. New rules will make digital record keeping for VAT compulsory as well as introducing a new requirement to file VAT returns directly from software. Many businesses currently type the figures for their quarterly VAT return directly into a free form provided on the government’s GOV.UK website. In future all VAT registered businesses within the scope of MTD will have to use accounting software to complete their VAT returns.
Overall, 38% of all UK businesses now use accounting software for keeping their accounting records, a significant increase since 2016 . This increase seems to have come from businesses which had previously been using a mixture of electronic and paper-based systems.
Only 54% of VAT registered businesses currently use accounting software. The proportion of all businesses relying on paper based records alone remains unchanged at 25%, and this includes 13% of those businesses that will need to implement MTD for VAT.*
Of those businesses we surveyed, 34% will be relying on their accountant or tax adviser to deal with the changes for them, 20% will be buying new accounting software and 15% have done so already. However, 20% of businesses that will need to implement MTD for VAT have not yet made any preparations for it.
Anita Monteith, ICAEW Technical Tax Manager, said:
“We continue to fully support HMRC’s ambition to increase the use of digital technology, but we are concerned that based on these results many businesses are not going to be ready for implementation in April 2019. The lack of awareness among businesses about MTD is of concern and needs to be addressed: the communications on MTD do not appear to be getting through to VAT registered businesses. We would like to explore with HMRC what more we as business advisers we can do to help. It is also clear that even among businesses that are aware of MTD for VAT, many of them have not started to prepare to implement it. Given the need to review existing systems and potentially evaluate, purchase and test new software, this is a worry. We want to help make MTD a success and also ensure that businesses get this right, but time is running out. MTD for VAT is a major change in tax administration and it is important for the UK tax system that it is a success: this is too important to be rushed.”
*Not all VAT registered businesses will be within the scope of the new rules. Around 40% of all VAT registered business are registered voluntarily, their turnover being below the VAT threshold. Theses business are not within the scope of MTD.
Please direct all media inquiries related to this article to:
Caroline Florence - ICAEW press office
Tel: +44 (0) 207 920 8564