With Making Tax Digital (MTD) for VAT due to be rolled out in less than six months’ time, Lords have warned that there is “overwhelming evidence” indicating that businesses are still “under-prepared.”
Voicing concerns at a Lords hearing on MTD for VAT in recent days, Baroness Noakes said that businesses were “heading for a giant car crash” with MTD, due to a widespread lack of awareness of what the project involves and what VAT-registered firms need to do in order to prepare.
MTD for VAT will be rolled out as mandatory for most VAT-registered businesses earning above the £85,000 VAT registration threshold from 1 April 2019. This means that these businesses will need to begin using MTD-friendly software to store their VAT information and submit reports to HM Revenue & Customs (HMRC).
Theresa Middleton, Director for Making Tax Digital for Business at HMRC, told the hearing that 23 software products had already been made available, after being “tested fully” by the tax authority. She added that “there will be many more products ready by April.”
Ms Middleton acknowledged that there had been “mixed enthusiasm” among accountants and small businesses with regards to MTD, but insisted that the project would greatly improve the tax reporting process and that businesses would soon see the benefits.
“The half million who can join now are those that have the most straightforward affairs and are up to date,” she said.
“Over the coming months, we are going to be adding additional functionality.”
When asked why some charities, local authorities and trusts had been allowed a six-month deferral while small and medium-sized enterprises (SMEs) were not entitled to this, another HMRC spokesperson said that the Revenue had carried out a “comprehensive analysis” of business’ requirements and found only a minority who required additional support to aid in the transition.
Nevertheless, the spokesperson admitted that the decision to provide the deferral to only a very limited number of businesses was in part due to efforts to “minimise the amount of yield to lose,” which she said was “negligible.”
Existing plans will see most VAT registered businesses expected to be compliant with MTD for VAT from 1 April, with MTD due to be rolled out for other taxes and types of businesses ‘shortly afterwards’. If your business is not prepared, it is important to seek specialist advice now.