Since it was first announced in 2015, Making Tax Digital (MTD) has faced a number of delays and setbacks on the road to making HMRC the “most digitally advanced tax system in the world”.
The first big milestone for MTD passed in April 2019, with VAT registered businesses required to file future VAT returns digitally.
However, indications show that thousands of businesses across the country failed to report their first set of quarterly returns digitally on the 7th August deadline.
Find out more about MTD for VAT and how businesses fared with their first VAT returns through MTD in our latest blog post.
What Did VAT Registered Businesses Need to Do?
MTD for VAT first became mandatory in April 2019, from which date all businesses with a taxable turnover of more than £85,000 would be required to keep their VAT records digitally and submit returns through the MTD platform, this would need to be done using MTD compliant software.
How Many Businesses Failed to Submit Their Returns?
According to The Times, around 120,000 businesses missed the deadline for filing their tax returns through HMRC’s MTD platform. Despite the initial fear that fines would be issued, HMRC has shown leniency in order to allow businesses to be “fully focused” in preparation for the possibility of a no deal Brexit on 31st October.
Businesses Are “Unprepared” for Making Tax Digital
Given the number of businesses that failed to submit their VAT returns through the MTD platform, it is no surprise that a YouGov poll found that 57% of respondents said that they ‘did not feel prepared’ for the changes that Making Tax Digital brings.
Why Aren’t Businesses Adopting Making Tax Digital?
There are several reasons why businesses, particularly those that are smaller, have failed to or were unable to adopt MTD in time to submit their first quarterly VAT returns:
- Cost – Businesses may not have the money available to hire new staff or an accountant to maintain digital VAT records.
- Software – Businesses may have gone to submit their VAT returns without knowing they needed to use HMRC approved software to do so.
- Time – Businesses may not have had the time to train staff, hire staff or learn how to submit their VAT returns through the new platform.
- Didn’t Know – Despite the deadline passing and significant communication by HMRC about the changes, a YouGov poll suggested that 12% of bosses had not even heard of the new MTD for VAT initiative.
- Inclination – With Brexit fast approaching, some business owners may have simply put MTD on the backburner whilst preparing other areas of their business.
What’s Next for Making Tax Digital?
MTD is, without doubt, the largest and most ambitious change to the UK tax system we have ever seen, couple this with the most likely outcome of Brexit currently being a no deal on the 31st October and it’s easy to anticipate more growing pains along the way.
The next planned step in the MTD timeline is MTD for Corporation Tax, this will mean that everyone who pays corporation tax will have MTD reporting and digital record keeping duties from April 2020.
How Can I Ensure I Am Prepared?
If you are a VAT registered business and missed the first quarterly return through the MTD platform, don’t panic, you are not alone. However, it will pay to prepare your business now rather than wait until another deadline passes. You can ensure you are prepared by:
- Software – You will need to keep records digitally from the start of your accounting period; to do this, you will need to invest in software such as QuickBooks which is compatible with HMRC’s digital tax system.
- Accountant – If you use an accountant to manage your accounts, you should ensure your accountant is prepared for MTD. As well as keeping you compliant, an accountant that has a thorough understanding of MTD will be better placed to offer advice and guidance.
- Training – You should ensure that your staff understand the ins and outs of MTD, how it impacts your business and any changes it will make to their role.
MTD Accountants Bristol
At FCF, we have already helped numerous businesses prepare for MTD for VAT. We use software that is compatible with HMRC’s system and are QuickBooks certified ProAdvisors.
If you’re looking for an accountant to help you with MTD, give one of our team a call today on 0117 3790810 to arrange a free initial consultation.
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This post was written by Steph Roffey