Businesses that use Making Tax Digital (MTD) for VAT prepare and submit tax returns faster than those that do not, a major study has revealed.
The research comes before the introduction of MTD for VAT for all VAT-registered firms, regardless of income.
According to the report, almost 1.6 million businesses had joined MTD for VAT as of December 2021, with more than 11 million returns submitted successfully using MTD-compliant software, such as Xero or QuickBooks.
Of these businesses, seven in 10 (69 per cent) reported experiencing at least one benefit from MTD, such as “preparing and submitting returns faster” and “increased confidence that they were getting tax right”.
A similar number (67 per cent) also felt that MTD had “reduced the potential for mistakes in at least one aspect of the record keeping, preparing and submitting returns process”.
The study comes ahead of 01 April 2022, the date all VAT-registered businesses – regardless of income – will be required to prepare and submit digital VAT returns under the MTD regime.
Until then, only businesses with a taxable turnover above the VAT threshold (currently £85,000) are required to register – although VAT-registered businesses can choose to register voluntarily.
Commenting on the report, Joanna Rowland, HMRC’s Director General for Transformation, said: “By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs.
“We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.”
Mike Cherry, FSB National Chair, added: “We have worked hard to ensure Making Tax Digital launch dates were adjusted to give small businesses more time to prepare and allow more competition to open up in the accounting software market.
“It’s important that firms do all they can to get ahead of deadlines and access the affordable platforms that are now available; if they are members of FSB, they will have access to a new easy Making Tax Digital member service that we are creating.”
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