Are you one of them?
Two new studies have hinted that thousands of small businesses across the UK are still unprepared for Making Tax Digital – just weeks away from when the regime is due to go live.
The British Chamber of Commerce’s study of almost 1,000 firms from across the UK recently revealed that around a fifth of companies which will be required to sign up have never heard of Making Tax Digital or know it only by name.
However, even amongst those that have started preparing only just over a third of businesses have upgraded or started using accounting software to prepare for the introduction of Making Tax Digital.
In a similar study, conducted by the Federation of Small Businesses at the end of February and beginning of March, around 27 per cent of the 746 VAT-registered questioned said they had not started preparing for Making Tax Digital, while a fifth had started preparing by acquiring quotes for necessary software but had taken no further steps.
These figures are extremely concerning considering the landmark shift that Making Tax Digital will have on the UK tax regime for VAT-registered companies.
From 1 April 2019, most VAT-registered businesses earning above the VAT threshold (£85,000) will be required to report their affairs digitally on a quarterly basis, using software that is compliant with HM Revenue & Customs’ (HMRC) systems.
While more than 70 per cent of businesses already report their VAT online, Making Tax Digital will lay down stricter rules and requirements by which businesses will have to abide.
The information reported to HMRC will essentially remain the same, but the requirement for maintaining records will differ significantly in that businesses must store information digitally and prepare VAT returns using these records.
In order to do this, they can use ‘functional compatible software’, or an API-enabled spreadsheet or a traditional spreadsheet and a bridging software to link with HMRC digitally.
Most businesses that fall within the threshold must start following the Making Tax Digital rules from the first day of their first VAT period that starts on or after 1st April 2019. However, those with complex matters may be able to delay their start date to later in October 2019.
This means that those who aren’t yet prepared now only have days left to ensure they are ready for this landmark change.
We would encourage any businesses owners that have still not yet prepared for Making Tax Digital to contact us today to see how we can assist them.