MTD Six Months On: 94% of Firms File on Time
The biggest transformation to the tax system this century, Making Tax Digital (MTD) for VAT came into force for more than a million businesses in April.
Under the changes, VAT-registered businesses with a turnover that exceeds £85,000 need to keep digital tax records and submit their VAT returns to HMRC using compatible software like FreeAgent or Xero.
Six months after the implementation and the digital rollout has been something of a success, with 94% of those who had signed up before the deadline managing to submit a return on time, according to HMRC figures.
But the new system has been affected by some technical difficulties and questions remain over how successful MTD will be when it is rolled out across more taxes, affecting more business owners.
The Government originally wanted to have the full tax system digitised by 2020, including plans to phase out self-assessment. But plans to bring other taxes under the MTD system have been put on a back burner for the time being.
Citing concerns about the pace of change, particularly for smaller businesses, the Chancellor said in his Spring Statement that MTD will not be mandated for income or corporation tax until at least 2021. He also said that MTD for VAT would not be extended to all VAT-registered businesses until at least 2021.
The rollout has not been without its share of technical problems. Several users have reported problems with payments - specifically where HMRC has taken incorrect payments via direct debit or failed to take a payment, resulting in an unexpected default letter.
HMRC also announced that in order to deliver its responsibilities under Brexit, it has been forced to divert staff and resources away from MTD-related IT projects and helplines.
This meant that, between January and May, there were long queues on the HMRC VAT helpline, when many business owners were trying to find out how the changes would affect them.
Miles Grady, Director of CloudAccountant.co.uk, said: “Six months on and the Making Tax Digital rollout seems to have been a success. With enormous changes to the way taxes are collected, it is a wonder that the rollout has not hit by more problems.
“On this score, the Government deserves credit for not rushing wholesale changes and for taking a very light-touch approach to non-compliance.
“While a few expressed concerns at the beginning, the businesses that we work with have all taken to Making Tax Digital like ducks to water. Using systems like Xero and FreeAgent to manage their finances has made their lives much easier.”
For more information about MTD-compliant cloud accounting software, speak to a member of the CloudAccountant.co.uk team today. Call: 0808 281 0303.