Peter McMahon, Tax Partner at Top 100 London accountancy firm Grunberg & Co is warning that the clock is ticking for business to prepare their VAT systems in time for the upcoming digital tax revolution.
With less than six months to go until the Government launches Making Tax Digital for VAT, Peter and his colleagues fear that too many VAT-registered businesses that fall within the current threshold (£85,000) may not be prepared for the new online reporting and recording systems.
He said: “We have been holding a number of workshops and meetings at our offices recently that are aimed specifically at the preparations required for Making Tax Digital, which launches in April next year, and one of the common communications we have received back from businesses is that they lack any information on what is required of them.”
Peter said that this was not surprising considering the lacklustre attempts by HM Revenue & Customs to disseminate information about this landmark shift in tax.
“Considering that we have known about MTD in one form or another for three years now it is somewhat astonishing that HMRC only began to communicate these changes directly to businesses in September,” explained Peter.
“Had it not been for firms such as ours contacting clients and local businesses they may have been completely unaware of this change, which fundamentally affects the way that businesses prepare VAT returns and record their VAT affairs.”
While many businesses already report their VAT online, Making Tax Digital (MTD), as the initiative is known, will lay down specific rules and requirements that businesses will have to abide by.
Under the new system, the information reported to HMRC will essentially remain the same, but the requirement for maintaining recordings will differ under the new rules.
This will mean that a company can no longer keep manual records and must instead maintain the information it holds digitally.
They must then use ‘functional compatible software’, or an API enabled spreadsheet or a traditional spreadsheet and a bridging software to link with HMRC digitally.
“These records must capture more information than is currently required to be recorded,” Peter added.
“It shouldn’t be the sole responsibility of agents, such as accountants, to highlight this change to businesses.
“While we have done our best to make sure our clients and contacts are aware and ensured that they have the right online accounting software and training in place, I fear that there may be many more businesses, both large and small, who are walking blindly towards this major change with little guidance or the proper support.”
Peter warned that while VAT was the first form of tax to be targeted by the new digital tax regime, the Government has confirmed that other forms corporate taxation will soon fall under the same quarterly reporting requirements from April 2020.
To find out more about Grunberg & Co’s Making Tax Digital expertise, please visit www.grunberg.co.uk