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24% of firms have never heard of
Making Tax Digital, which comes into effect next April for
VAT
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Only 10% of firms know ‘a lot of details’ about the
switch to the digitised tax system
Ten months ahead of its planned introduction, an alarmingly high
proportion of UK businesses have little or no awareness of HM
Revenue and Customs’ flagship Making Tax Digital
project, according to new research released today (Tuesday)
by the British Chambers of Commerce, in partnership with Avalara.
Based on the responses of over 1,100 firms, with less than a year
to go until the government plans to roll out Making Tax Digital
(MTD), there is a widespread lack of awareness among business
communities about the switch to a digitised tax system. A quarter
(24%) of firms have never heard of it, and two-thirds (66%) know
it only by name or some details about it.
All VAT registered businesses will have to maintain digital
records for VAT and submit their returns digitally from April
2019 – just days after the UK leaves the EU. Of those that are
aware of the change, a quarter (25%) have made no preparations at
all. This is a concern as MTD will require VAT registered firms
to have MTD compatible software in place that can create a VAT
return and connect to HMRC systems via an Application Programming
Interface (API). This is a much more complex process for
businesses than the current online process of manual completion
of VAT returns.
As the government prepares to roll out this flagship policy,
businesses are reporting low levels of satisfaction and support
from HMRC. Asked to rate the overall level of service, help and
support received from HMRC on a scale of one to five, 60% of
firms gave the tax authority a rating of 3 or less. Levels of
direct engagement with HMRC remain low. Of those firms that are
aware of MTD, just 6% of businesses have contacted HMRC for
advice (including online services, webinars, or via their
telephone services), compared to 51% who have spoken to an
accountant.
The BCC is therefore calling for the introduction of Making
Tax Digital to be delayed for all businesses until the start
of the 2020/21 financial year. This would give HMRC the breathing
space to engage effectively with businesses, ensure that the
necessary software is in place, and raise levels of awareness
about the impending changes. 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 level of
uncertainty over the final customs arrangement), as well as
day-to-day compliance issues. The delay to this initiative would
also provide HMRC with the extra headroom that maybe needed to
support business on these vital issues.
Mike Spicer, Director of Economics and Research at the
British Chambers of Commerce (BCC), said:
“The government’s aim to modernise the UK’s tax system is
admirable, but in view of low business awareness and the
impending challenges of Brexit, it would make sense for HMRC to
delay the implementation of Making Tax Digital in order to get
this change right.
“We are concerned that far too many firms still aren’t clear on
what Making Tax Digital is, or what it means for their
operations. With just months to go before the deadline, these
knowledge gaps could make the timeline for change unworkable for
many firms.
“Ministers must face up to the reality of the pressures facing
HMRC and delay the introduction of Making Tax
Digital for all businesses for the next financial year. This
would allow the Revenue to focus its immediate attention on
supporting businesses through the Brexit process, which must be a
key priority.
“When Making Tax Digital is implemented, the acid test will be
whether it ultimately creates a simpler and more efficient tax
system, or yet more onerous administrative burdens that stifle
the growth of UK firms.”
Richard Asquith, VP of Global Indirect Tax at Avalara,
said:
“Making Tax Digital will affect 2.6 million businesses. It is the
biggest overhaul in VAT obligations in decades. Approximately 25%
of businesses are still using manual or spreadsheet record
keeping, which falls foul of HRMC’s new requirements. It is still
not clear how they can become compliant without more education
plus investment in compliance accounting packages. To date, HMRC
have remained confident that they can cope with MTD and Brexit;
although 29 other efficiency projects have had to be cancelled or
delayed in preparation of the UK leaving the EU in March 2019.
“HMRC will be clarifying their Making Tax Digital program at our
free Tax Summit in London on the 3rd October.
This will be a great chance for businesses to have some of their
concerns addresses by HMRC directly.”
Ends
Notes to editors:
The British Chambers of Commerce (BCC) surveyed 1,073 businesses
from all regions of the UK online from 11 to 25 April 2018.
