The Making Tax Digital (MTD) ‘roadmap’ has shifted a few times since the initiative launched in April 2019, but we will finally see the completion of the rollout of the MTD for VAT as all VAT-registered businesses, regardless of turnover, will be required to comply in just a matter of weeks.
What will follow is a period of two years, during which a new cohort of taxpayers – including many self-employed businesses and landlords – should prepare to comply with MTD for Income Tax and Self-Assessment (ITSA).
Too few taxpayers participating in Income Tax pilot
We are aware that the pilot scheme, using software in preparation for the next phase of the MTD initiative (MTD for ITSA), has seen a huge drop off in the number of people taking part.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the new rules from 6 April 2024 – a year later than originally planned. The rules will see a single end-of-year tax return replaced with six distinct submissions.
A small number of businesses and agents are already keeping digital records and providing updates to HMRC as part of the live pilot, to aid with the evaluation and development of the MTD service for ITSA.
As accountants, to know that the system is perhaps not being properly put to the test is concerning, especially considering number of taxpayers that will be impacted by the next phase.
A lack of awareness amongst those affected, combined with a system that isn’t entirely ready to serve its intended purpose is likely to be a recipe for disaster.
On top of this, the self-employed and landlords will be expected to pay to use MTD-compatible software, in order to comply, however it seems that many are unlikely to qualify for the financial discounts currently on offer under the Government’s latest Help to Grow: Digital scheme; a scheme that is meant to aid with the adoption of digital tools.
Software compatibility impacts SME experience of MTD
Research which was prepared for HMRC by Kantar Public has suggested that there are a number of key things impacting SMEs experience of the MTD regime; namely, what they require from the software, how open and willing they are to embrace change, and how compatible their chosen software solution is.
The openness to change is itself influenced by financial confidence, the support network available to the business (i.e. agent, and advisers), and the VAT requirements, for example.
Those SMEs with less complex and involved needs report feeling overwhelmed by much of the new-fangled technology and software packages on the market, while those with greater needs report a more positive experience, and having benefitted from the implementation of software.
Whilst they feel they may not need to transition completely, SMEs who have staved off true digitisation thus far with the use of bridging software are undoubtedly missing out on the benefits that come with truly compatible software.
You can learn more about the benefits of using cloud accounting software, thanks to our Cloud Accounting Tips & Tricks Hub.
How can George Hay help?
Even though migrating to the latest cloud accounting technology might be outside of your comfort zone, the same cannot be said for us.
Whilst we cannot say how the MTD for ITSA system will eventually work, our aim is to make your journey to meeting your digital tax obligations stress-free and worthwhile beyond compliance.
If you’re a business that needs to comply with MTD for VAT rules by April 2022, and you’re unsure or anxious about getting it right, we are here for you too.
Rest assured that all capabilities can be accommodated, where MTD is concerned, and we will support you to find and implement the solution best suited to your requirements.
To put your best foot forward in respect of preparations, contact us today to speak with one of our friendly and professional cloud accounting experts, in Bedfordshire, Cambridgeshire or Hertfordshire.