With the MTD deadline fast approaching, only a fraction of the UK business required to join MTD next week have registered and only two percent of accounting firms have registered any clients for MTD.
AccountingWEB readers are probably sick of being reminded, but here goes none-the-less: for VAT periods starting from 1 April 2019, most businesses above the VAT threshold will need to keep their records digitally and submit their VAT return using MTD-compatible software.
And yet, the take up seems remarkably slow. According to HMRC, over 70,000 businesses have already signed up to the new service. You don’t have to be a mathematician to see that’s well shy of the 1.2m businesses due to be affected by MTD.
The current run rate for MTD sign-ups is currently 3,000. With April 1 looming, it’s going to take a tidal wave to get everyone set up in time. Meanwhile, businesses aren’t the only ones that are lagging.
An FOI request by the cashflow forecasting app Float found that only two percent of accounting firms (that’s 1,679 agents) have registered any clients for Making Tax Digital, from an estimated 72,000 tax agents nationwide.
This seeming intransigence doesn’t gel with HMRC research conducted in December which showed that 83% of businesses familiar with MTD had “started to prepare”. According to Float’s CEO Colin Hewitt, businesses have been let down by a confusing sign-up process and “reactive rather than proactive” accountants.
“[Many accountants] won’t have done more than sending a few emails which will probably be sitting buried in inboxes across the country. While solutions like Xero and Quickbooks have been very proactive in telling their customers about MTD, it’s obvious from the data that businesses haven’t yet responded to the registration process required.”
A big question is around the approach HMRC will take with the mass of likely late sign-ups. Float’s Hewitt is confident that there will be “leniency with businesses who are late to register” and there will be a “step up the communications on what is required”.
Indeed, an HMRC spokesperson confirmed to AccountingWEB that it'll not be a late fine apocalypse. "April 1st is not a cliff edge for sign-ups – the first returns for most businesses under the new system won’t be due until August at the earliest," said the HMRC spokesperson. "We recognise that businesses will require time to become familiar with the new requirements." The spokesperson added that in MTD's first year, the tax authority will take a light touch approach to penalties. "HMRC will not issue filing or record keeping penalties where businesses are doing their best to comply with MTD."
But despite HMRC's merciful approach to onboarding, Float's Hewitt warned business need to get in gear. “To fulfil MTD requirements properly, businesses need to look at registration today if they haven’t already – embracing its adoption rather than fighting it. If you haven't reviewed your VAT process, methods and software, you should. Also, if your accountant isn’t able to advise on MTD now, this should be a red flag and it might be time to start looking for new representation.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.