Save content
Have you found this content useful? Use the button above to save it to your profile.

Are SMEs ready for Making Tax Digital for VAT?

28th Mar 2019
Save content
Have you found this content useful? Use the button above to save it to your profile.

On Monday, Making Tax Digital for VAT (MTDfV) will come into force for businesses with VAT taxable turnover exceeding the compulsory £85,000 VAT registration threshold. Those businesses will need to keep their records digitally and submit all future VAT return data to HMRC using MTD-compatible software. AAT, working with YouGov, has conducted a survey of over 1,000 decision makers working for small and medium-sized enterprises (SMEs), to see how they feel about MTD ahead of the launch.

One in four of the decision makers (26%) told us that they believe MTD, and the process to move taxes onto a digital platform, would be a good thing for their business in the long-term, within five years. Only 16% believed it would have a negative impact, while almost half (46%) thought it will make no difference.

HMRC believes that when MTD has been fully rolled out, it will ultimately make complying with all tax return filing obligations easier for small businesses. Monday’s launch of MTDfV is merely the first, almost tentative, step along the road to HMRC achieving its ambition to completely digitise the UK tax system. I believe that the real benefit to business from digital accounting will be access to near limitless real-time information at the press of a button. This will empower businesses and taxpayers to proactively plan their finances more effectively in the future. Therefore, the system should be a good thing for most businesses in the long term.

Our survey also asked the SME decision makers how prepared their businesses are. Worryingly, of those affected by MTDfV, over one in ten (11%) called themselves very or extremely unprepared, rating themselves 1,2 or 3 out of 10 in terms of how prepared they are, where 1 is extremely unprepared. Around one in seven (15%) didn’t know how prepared they are, which is perhaps also worrying. Happily, more than one in two (56%) said they are fairly or extremely prepared, rating themselves between 7 and 10, where 10 is extremely prepared.

It’s clearly a concern at this late stage that some small businesses are still totally unprepared for the first phase of MTD.  However, all is not lost, there is still some time for them to prepare, and for their accountants to help them. The good news, for the vast majority of those businesses affected by MTDfV is that they won’t have to submit their first MTD-complaint VAT return data until around the end of July or even early August. This means that there is still the opportunity for small businesses to ensure they have the right digital software provider, and for accountants to help them get on the right path.

Brian Palmer is Tax Policy Adviser at AAT (Association of Accounting Technicians)

Replies (4)

Please login or register to join the discussion.

avatar
By GHarr497688
28th Mar 2019 10:15

I am so sorry but this article is misleading . You infer that their is still time to get digital records sorted. This of wrong as digital records need to be kept from day one otherwise you would have to put a full quarters records on a computer in a few days before the filing date . This is not what MTD is about . Also the records for VAT are different for those for other Taxes and so MTD in the present form isn’t doing what Government say MTD is about . The only records required for VAT are gross vat net on certain expenses and so how are the other expenses to be included and how do sales, purchases and bank reconciliations get done . All most people are doing is panicking to comply with a Law that’s been messed around with in a half baked way so that Government do not look idiots . I challenge HMRC to reply to this post and prove me wrong .

Thanks (1)
avatar
By Michael C Feltham
29th Mar 2019 20:39

"AAT, working with YouGov, has conducted a survey of over 1,000 decision makers working for small and medium-sized enterprises (SMEs), to see how they feel about MTD ahead of the launch."

And, of course, they surveyors took full account of the core metrics of a fully segmented analysis of the UK SME Business Population; and therefore asked a variety of plumbers, tarmac layers, etc.

Whose answers would have probably been something like:

"P off can't you see I'm busy, John?"

"Do what?"

Thanks (2)
avatar
By Matrix
30th Mar 2019 10:21

You need to ask 1,000 micro businesses instead and read the many threads on here. There is no perceived benefit for many of these, many do not have accountants and will have to change the way they do things and incur costs.

Thanks (0)
avatar
By richardterhorst
05th Apr 2019 09:08

Digital record keeping is common in other juriusdictions. Some have for years already using it so I do not understand the furore. maybe because HMRC cocked up implementation?

It has its benefits but if its sole objective is to raise more through penalties then it will be a lost cause. Unfortunately HMRC appears more interested in penalties for the SME/Micro (they do not chase the big firms, instead do sweetheart deals) than anything else.

I have been using a 14lbs hammer to get larger clients to understand and implement MTD but their answer is "its an accountants problem."

Thanks (0)