New research from the Institute for Chartered Accountants in England and Wales (ICAEW) suggests over 40% of small firms soon to be mandatorily included in the UK Government’s Making Tax Digital (MTD) initiative remain unaware of the project.
VAT-registered small businesses with annual taxable supplies of more than £85,000 will be required to make digital records and file VAT returns directly via MTD-approved software from 1st April 2019.
The ICAEW’s survey reveals there has been a rise in the number of small firms using accounting software in readiness of the streamlined digital tax system that will provide regular updates to HM Revenue and Customs (HMRC) online.
However, a quarter of small firms surveyed still work with paper-based accounting systems, a figure that has remained unchanged when the same survey was taken two years ago.
More worryingly, this figure includes 13% of small businesses that will need to use MTD for their VAT record-keeping in the spring.
In the coming years, all VAT-registered small businesses within the scope of MTD will be required to use digital accounting software to finalise and submit their VAT returns.
Earlier this summer, HMRC reiterated that it was forging ahead with its plans for the implementation of the MTD system despite the uncertainty surrounding the UK’s impending exit from the European Union (EU).
HMRC’s plans to create a digital tax system inclusive of all self-employed individuals saw the tax authority open an income tax pilot, giving the self-employed a chance to trial keeping business records digitally and submitting regular income tax updates to HMRC.
However, Anita Monteith, technical tax manager, ICAEW, voiced fears over the Institute’s latest survey results, warning “many businesses are not going to be ready for [MTD] implementation in April 2019”.
“The lack of awareness among businesses about MTD is of concern and needs to be addressed: the communications on MTD do not appear to be getting through to VAT-registered businesses,” said Monteith.
“We would like to help explore with HMRC what more we as business advisers can do to help.
“It is also clear that even among businesses that are aware of MTD for VAT, many of them have not started to prepare to implement it.
“We want to help make MTD a success and also ensure that businesses get this right, but time is running out.”
Your local TaxAssist Accountant can help with Making Tax Digital
At TaxAssist Accountants, we’ve spent a great deal of time training and developing the right support services to help small businesses cope with the new digital reporting system that aims to haul the UK’s tax reporting into the 21st century.
HMRC will not be offering software to help small firms report their income tax quarterly, so we have partnered with Intuit QuickBooks to make it easier to manage your accounts online, wherever you are.
Your nearest TaxAssist Accountant is available for a free initial consultation on MTD and how it affects your growing business. To arrange an appointment, call our friendly and experienced team today on 0800 0523 555 or drop us a line using our online enquiry form.