With less than 6 months to go before Making Tax Digital (MTD) comes in to force, a House of Lords Sub-committee has been told that less than 15% of businesses are ready for it.
From the 1st April 2019 all VAT registered businesses with turnover over £85k must keep records digitally and submit their VAT returns using Making Tax Digital HMRC approved software.
You can read more background and further requirements regarding Making Tax Digital here, but the deadline next spring is the most pressing one.
The Sub-committee was attended by members of the Federation of Small Businesses (FSB), the CEO of the Iris accounting software group and the Tax Director from the Office of Tax Simplification (OTS), and they had some worrying information to give.
Paul Morton of the OTS said that ‘Less than 30% of businesses are confident that they understand what is required and less than 15% of businesses say that they are prepared. Some people have commented that they will deregister from VAT if they registered voluntarily or reduce their activities in order to deregister if they were registered.’
More worryingly was the fact that only 85% of agents – accountants, tax advisers and bookkeepers – knew what was required. That means that 15% of agents do not know what is required, and if 85% do know what is required, why are less that 15% of their clients ready for it? That’s a big gap between those that know and those that are ready – has your adviser told you what needs to be done?
Mike Cherry of the FSB said that some businesses were not making the necessary changes due to the timing of the roll-out. Most businesses that do so will change their accounting software at the end of their financial year or VAT quarter and the 1st April deadline does not coincide with that for them.
Making Tax Digital was first announced in the 2015 budget so the Committee questioned why so many were unaware or not ready for the upcoming deadline, and the blame for that was firmly laid at the feet of HMRC for their lack of useful and timely information provided to businesses.
However, you will not be able to blame HMRC for it should you not be ready. You need to get your business prepared for Making Tax Digital and there are now at most two VAT quarters between here and the deadline. We recommend Xero used alongside ReceiptBank to make you fully MTD compliant – as well has a whole host of other benefits to you business.
To talk to us about getting set up on Xero and ReceiptBank and making sure you are MTD ready, get in touch on the details above.