More than third of small businesses ‘completely unfamiliar’ with new digital tax regime
With the April 2019 deadline for companies to digitise their VAT tax processes looming, 36 per cent of UK businesses say they are still ‘completely unfamiliar’ with the new regime, according to Scottish accountancy firm Scott-Moncrieff.
The Making Tax Digital (MTD) regime makes it compulsory for businesses to digitise their VAT records and file returns directly to HMRC electronically. Through MTD, HMRC aims to eliminate manual intervention on VAT processes, in order to reduce human error and increase tax take.
36 per cent of businesses say they are prepared for the new regime, and 48 per cent have no plan in place at all to prepare for MTD.
HMRC has conceded that the MTD deadline was unrealistic and recently delayed it for some organisations, including charities, public sector entities and VAT groups. However, it is still compulsory for SMEs to be ready for April 2019, despite preparations likely being more difficult for them.
The MTD deadline falls around the time that businesses should be preparing for Brexit, on 29 March 2019. There are concerns that businesses, particularly SMEs, will be overwhelmed with preparations for both, and miss the deadline.
Just 25 per cent of companies currently have a plan for Brexit, down from 56 per cent a year ago. Businesses may have been deterred from extensive planning by the continuing lack of clarity over the implications of Brexit. For example, businesses might have expected to know by now whether the UK would be inside or outside a Customs Union, but such details remain undecided.
Scott Craig, VAT Partner at Scott-Moncrieff, said: “Many businesses simply lack the time and resources to prepare for Brexit and Making Tax Digital at the same time.
“The clock is ticking but many businesses are saying they have done no preparation at all – some have not even started the complex process of digitising all their VAT reporting links and upgrading their software and systems.
“Complying with current VAT regulations is a major challenge for many businesses, particularly those with international trade or operations. The added task of meeting the requirements of Making Tax Digital is only adding to existing stresses.
“Businesses swamped with preparations will welcome the delay to the deadline – but HMRC should be extending the deadline for all businesses. If a business’s preparations for MTD are already underway, this is not a reason to suspend implementation – six months is a very short extension.
“Anything HMRC could do to simplify the VAT regime would be highly beneficial to businesses.”