If you are a business owner, you will undoubtedly be aware of the Making Tax Digital (MTD) initiative that has been launched by the UK government. The aim of this scheme was to make all VAT reporting digitalized by the end of 2020. Of course, businesses were happy to hear that this deadline was extended due to the pandemic. However, the deadline is now looming once again as businesses with a turnover between £10,000 and £85,000 will have to be MTD compliant by April 2022. Despite the long notice, surveys are showing that there are still thousands of UK businesses who do not feel ready to implement MTD software in the new year. In light of these survey results, we thought now was a good time to revisit MTD so you can make sure you are prepared by April of next year.
What Do The Survey Results Tell Us About MTD?
Almost 300,000 UK SMEs have claimed that they are not ready for Making Tax Digital to be imposed on them in April 2022. The changes will require these businesses to implement a new software for collecting and reporting their taxable sales. Whilst bigger businesses have been required to this for some time now, April 2022 will see almost all UK businesses be required to implement the software. This will affect 1.1 million SMEs.
However, it is unclear whether small business owners will actually be more stressed by MTD. Whilst the implementation of the software will be stressful, as will the training of staff to use the software, the systems may actually help to reduce stress in the long run. Almost 60% of businesses surveyed agreed that digital tax reporting could reduce stress when filing tax returns. Indeed, the new systems will certainly make reporting VAT quicker and more efficient.
Does This Mean That MTD Will Actually Be Beneficial For SMEs?
Some experts certainly think so. MTD will mean that business owners will have to incorporate cloud-based services into their reporting systems. Whilst this could be slightly costly and complicated, industry experts are arguing that these systems can improve organizational health. These systems will certainly lead to quicker management information. This improvement in the speed in which business owners will be able to access their financial reports will hopefully mean that business can streamline their processes more efficiently. This may also mean that business owners will need to stress less about VAT reporting.
The only issue seems to be that business don’t feel prepared enough. There will undoubtedly be an integration period that may not be completely smooth, and these companies will have to train staff – which will be difficult if they themselves don’t feel completely confident about the new regulations. In addition to this, businesses have many questions, such as what software can they use, and what are the penalties for failure to comply? This information will have to be readily available before businesses can feel completely comfortable with MTD.
Are Any Businesses Likely To Be Exempt?
There are some very specific cases in which you could be exempt from MTD. These factors include your age or disability, your religious beliefs, or any other reason that implementing the software would be considered unreasonable or impractical, such as where your company is based.
However, you will need to apply to HMRC in order to gain an exemption. You cannot just presume that you are exempt. To do this, you will need your identification details (such as your VAT registration number) and you will also need to provide details on how you currently file your returns. More information on exemptions and the application process can be found on the gov website.
SMEs Need To Get Started With MTD By April 2022
It is recommended that you employ an accountancy service to ensure you are VAT compliant. With an accountancy firm, you can even still comply with the new MTD rules by sending your spreadsheets to them and let them handle the issues posed by making your tax digital, without the need to use the software.
That’s where we come in.
J&P is a registered accounting firm in the UK. We have the qualifications and strength to help you plan ahead, so please do not hesitate to get in touch should you have any further questions about this policy, or if you need any help with submitting your VAT returns. You can contact us at email@example.com, on our social media, or give us a call on 0161 637 1080.