Making Tax Digital: What you need to know
In just over six months’ time, the government’s new digital system for submitting VAT returns will go live. The first step in the Making Tax Digital initiative, which aims to help businesses keep up with their tax obligations more easily, the system for VAT returns comes into use on 1 April 2019.
The issue is, however, that two fifths of businesses have never heard of it, and have therefore made no preparations for it. A survey, carried out by the Institute of Chartered Accountants in England and Wales (ICAEW), found that although there has been a significant increase in the use of accounting software by VAT-registered companies, as many as 25 per cent are still using paper methods.
The survey results also suggested that of the 98 per cent of companies filing electronic returns, only 54 per cent use accounting software. Many organisations are relying on their accountant or financial advisor to deal with the changes on their behalf.
Paper VAT returns will not be accepted from 1 April, meaning that those businesses still relying on them have only a short time left in which to implement a software that’s Making Tax Digital compliant.
The ICAEW’s technical tax manager, Anita Monteith, expressed concern over such a high number of organisations being unaware – and unprepared – for the implementation.
“The communications do not appear to be getting through to VAT-registered businesses, and even among businesses that are aware of Making Tax Digital, many have not started to prepare to implement it. Given the need to review systems and potentially evaluate, purchase and test new software, this is a worry,” she said.
Making Tax Digital
The Making Tax Digital initiative has been introduced to not only make submission of tax returns easier, it also aims to reduce mistakes made on them. These are thought to cost the government some £8 billion a year. In the future, businesses will not be required to give HMRC information it already holds or that it is able to get from banks, building societies and other government departments.
HMRC began a pilot for the initiative back in April 2018, which invited VAT-registered businesses and their agents to volunteer for the test. It remains private, however, with a limit to the number of companies that can engage with it. By April 2019, HMRC estimates that 150 software suppliers will be providing compliant software for VAT returns; currently the list of approved suppliers totals around 40.
Preparing for the switch
If you’re among the VAT-registered businesses that have no yet heard of – or prepared for – the Making Tax Digital changes for VAT returns, it’s not too late to get help. Expert tax accountants in London and across the South East will be able to help you make the switch, so that you’re not left behind. You’ll receive assistance with both selecting a suitable software provider and being trained on the platform, making for a smoother transition to digital VAT return submission.