Making Tax Digital (MTD) is a key part of the Government’s plans to make it easier for individuals and businesses to get their tax right and stay in control of their affairs. It aims to achieve this by constructing a modern tax system that is more efficient, more effective and more user-friendly.
Worryingly though, research continues to demonstrate that Making Tax Digital (MTD) is a big concern for VAT-registered small business owners and that many small businesses still do not fully understand the legislation and how it will impact upon them.
A study carried out by Intuit QuickBooks, found that more than three-quarters of SME owners found the regulations difficult to comprehend.
It also reveals that 70 per cent were struggling to find suitable tools to help them comply, including 63 per cent of owners who were not certain about which cloud-based software they would use.
Other fears about MTD highlighted in the survey, by SMEs, include handling the increased demand on time and managing the additional workload.
Ipsos Mori polled 2,900 small businesses and landlords for HMRC late last year and found that 71 per cent of respondents were unaware of the obligation to submit quarterly updates from 2020. A further 13 per cent knew of the requirements but lacked understanding of what each entailed.
Furthermore, 40 per cent of small business and landlords said they wanted guidance on how to prepare for MTD, whilst 72 per cent said they would ask an accountant or tax agent for advice.
Most recently and just ten months ahead of its planned introduction, The British Chambers of Commerce have found that, of 1,100 respondents, a quarter of firms have never heard of MTD, and two-thirds know it only by name or limited details about it.
As a result, they are calling on HMRC to delay Making Tax Digital for all businesses until the start of the 2020/21 financial year.
Clearly, few SMEs are completely ready for the new MTD regime which is due to come into effect in April 2019.
Under the current rules, from April 2019, VAT registered businesses with turnovers exceeding £85,000 will be required to maintain a digital record of their VAT transactions and submit their VAT returns using MTD-compliant software on a quarterly basis.
As it stands, MTD for income tax will not be mandated until April 2020, at the earliest. The same date is slated for Corporation Tax.
Toni Hunter, Partner at George Hay, said: “With the introduction of MTD drawing ever closer, it’s concerning that such a high number of businesses are still largely unaware of how their obligations are going to evolve in the coming months.”
“All business owners need to consider how they intend to comply, to avoid the risk of costly penalties.”
“We would encourage you to seek advice from your accountants, sooner rather than later, to ensure you’re up-to-speed and appropriately prepared.”
“We want to see the businesses we work alongside continue to thrive following the move to MTD. That’s why our foremost aims are to assist our clients with choosing and implementing software to best suit their business, and to offer professional support and advice throughout the transition and beyond.”