Ahead of the Spring Statement on 13 March 2019, the British Chambers of Commerce is calling for the introduction of Making Tax Digital to be delayed for all businesses until the start of the 2020/21 financial year.
The rollout of any government programme of this size would take considerable time and resources to smooth out to minimise the disruption to businesses. In the extraordinary context of the UK’s impeding exit from the European Union, we are concerned that HMRC will also be busy with efforts to support companies through the huge changes involved in this, such as the introduction of new customs arrangements, which still remain unclear.
The business taxation survey 2019 – we collected views from 1,000 businesses across the UK from all sectors and sizes. We found that:
- While awareness of MTD has gone up when compared to results from our 2018 Business taxation survey, there are still 22% of businesses that have either never heard of MTD or know the name only
- There is widespread dissatisfaction amongst the business community with the introduction of MTD
- The admin burden on small businesses has gone up dramatically
- Costs have risen and these are often unexplained
- There is a lack of clarity and support
What are the issues?
- Lack of awareness and preparedness
With less than one month to go until the government plans to roll out MTD, there is an alarming lack of awareness among business communities about the switch to a digitised tax system. Indeed, our survey results show that of those firms required to take part in MTD, only 19% have either never heard of it, or only know its name.
- Another significant upfront cost on business
Businesses are reporting that they are facing costs running into several thousands of pounds to upgrade to MTD compatible software – unacceptable at a time when firms are facing a myriad of upfront taxes and costs and significant uncertainty related to the UK’s impending exit from the EU. Many firms are also reporting significant new admin burdens, such as complicated software and quarterly reporting.
- Concerns over HMRC’s capacity to deliver MTD
While steps have been taken to free-up capacity, businesses remain concerned that HMRC may still lack the resources to deliver MTD at the same time as supporting firms through the Brexit process (particularly given the possibility of a no-deal exit), as well as day-to-day compliance issues.
What is Making Tax Digital (MTD)?
MTD is the requirement for businesses to maintain digital records for VAT and submit their returns digitally using MTD compatible software that can connect to HMRC systems via an API (Application Programming Interface).
Who does it apply to?
VAT registered businesses above the £85k VAT threshold. Even if a firm’s taxable turnover drops below the threshold at any point after 1 April 2019 they would still be required to continue to keep digital records and use compatible software to send HMRC their VAT returns. This obligation doesn’t apply if the business de-registers from VAT or if they are exempt from MTD for VAT.
When does in come into effect?
MTD comes into effect 1 April 2019 for VAT. For a small minority of businesses that have more complex requirements (e.g. public sector entities required to provide additional information on their VAT return such as government departments and NHS Trusts), their mandation has been delayed until 1 October 2019. Other phases of MTD, such as the inclusion of corporation tax, won’t take place until after April 2020.