Businesses not ready for Making Tax Digital VAT deadline
Nearly two thirds of businesses (64%) say that Making Tax Digital is a good idea but that they need more support with their plans ahead of the deadline of 1 April for mandatory digital VAT reporting, and only 12% are confident of their approach, according to research from KPMG
The firm’s poll of 1,000 businesses asked which statement best described their attitude to Making Tax Digital and the 2019 deadline to comply with the new VAT legislation requiring all businesses registered to pay VAT over the threshold of £85,000 to digitally report transactional quarterly reports.
While nearly two thirds (64%) of respondents thought it was a good idea but wanted more support, one in five (19%) could see no advantages of changing the current VAT reporting system, while 5% said it would be damaging to their business.
Just 12% were supportive and ready for the 1 April deadline, literally days after Brexit day on 29 March.
From that date, most VAT-registered businesses above the threshold of £85,000 will have to keep digital records and submit VAT returns using compatible software. A small percentage of businesses with more complex needs are deferred to 1 October. After a soft-landing period of a year, a further requirement for digital links throughout the VAT return process, or a digital audit trail, will be required until the full implementation deadline of 31 March 2020.
Chris Downing, tax partner at KPMG said: ‘With just over a month to go until the deadline, it’s worrying to see that almost two thirds of businesses say that they need more support and are still in the process of working out what they need to do. This could potentially be both costly and time-consuming, depending on the changes that need to be made.
‘Although 98% of VAT registered businesses already file VAT returns electronically, Making Tax Digital will involve significant changes to their existing processes. For example, keeping digital records, maintaining a digital audit trail of all business transactions, and implementing new software to submit their VAT returns digitally.’
Downing cautioned that businesses also need to think about the flexibility of their systems and processes to meet potential future requirements.
‘HMRC are seeking to become the most digitally advanced tax administration in the world. We are likely to see provisions for income tax and corporation tax further down the line,’ he said.
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