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MTD awareness and planning business survey results

ICAEW has surveyed 500 business, asking if they are aware of the new requirements under HMRC's Making Tax Digital (MTD) programme and what steps they have take to prepare for the changes. Close to half of respondents said they had not heard of MTD for VAT. Read the full survey results.

ICAEW undertook its "MTD awareness and planning: business survey" in July 2018*. The survey was, in part, a follow up to that was undertaken in Spring 2016. Its aim was to further ICAEW's understanding of:

  1. Businesses' awareness of MTD for VAT requirements. Is awareness in some subsets higher than others? For example, are VAT registered businesses with taxable income over £85,000 more aware of requirements than VAT registered businesses overall?
  2. How businesses currently keep their accounting records and whether this has changed since our survey in 2016.
  3. What preparations businesses have made in readiness for the MTD for VAT changes beginning in April 2019.

Awareness of MTD for VAT

At the time of the survey, just over half (51%) of all UK VAT registered businesses had heard of MTD for VAT.

Among those which will be required to submit their VAT returns using software or an app, 58% were aware of the change.

Notes:

Not all VAT registered businesses will be within the scope of the new rules.

From 1 April 2019, MTD for VAT will become compulsory for VAT registered businesses with taxable supplies of over £85,000.

Around 40% of all VAT registered businesses are registered voluntarily, their turnover being below the VAT threshold. These businesses are not within the scope of MTD.

How businesses currently keep their accounting records

More businesses confirmed that they use accounting software (38% of those surveyed), a significant increase since our 2016 survey (25%).

This increase seems to have come from the group of businesses which had previously been using a mixture of electronic and paper based systems, ie, from businesses which already had access to computer equipment and some knowledge of how to use it.

For VAT registered businesses, the proportion using accounting software now stands at 54%.

The proportion of businesses using paper-based accounting system is unchanged at 25% of all businesses and 13% of all VAT registered businesses.

What steps have businesses taken to prepare for MTD?

Of those businesses aware of MTD, 75% have made a plan to cope with MTD. In the majority of these cases, that plan is to rely on their adviser.

One third (34%) of all businesses questioned say their accountant or tax adviser will deal with MTD for them.

This is good news for ICAEW members who have been updated regularly about MTD developments by the Tax Faculty. ICAEW members are helping businesses to move to digital generally.

Of those surveyed, 20% will be buying new accounting software and 15% have already done so.

However, 20% of businesses with taxable turnover above £85,000 say they have made no preparations themselves at all.

Next steps

We understand that the final decision to go ahead with mandation of MTD for VAT from 1 April 2019 has yet to be taken. It will be made by the end of October 2018.

ICAEW’s view

MTD should only be launched when it has been proved, through the pilot, to work.

ICAEW will continue to help its members embrace digital technologies for their own business and support clients embrace digitalisation. ICAEW's view continues to be that this is right where and when we believe digital technologies deliver something for business. However, it is the benefit for business and not tax which should be the driver.

ICAEW's Tax Faculty is concerned by the apparent lack of awareness of MTD among businesses.

HMRC published its first communication aimed at business on 17 September 2018, Making Tax Digital: how VAT businesses and other VAT entities can get ready, but has yet to launch its marketing plan to business.

At this stage there is no information about MTD in either the notice to file a VAT return sent to a VAT registered business before its return is due, nor in the acknowledgement when it has e-filed a VAT return.

* The results above are drawn from a telephone survey with a representative sample of 500 businesses across the UK (data weighted accordingly to reflect UK business population). The interviews took place between 9 and 19 July, 2018. The interviews were undertaken by IFF Research on behalf of ICAEW. This survey adheres to the Market Research Society code of conduct.