Digital Revolution: MTD for VAT
IS YOUR BUSINESS MTD COMPLIANT?
A quick update about how has MTD for VAT been with your business so far?
A recent survey conducted by Quickbooks points out that over 300.000 small businesses fall into mistake thinking they`re MTD compliant companies.
As we often emphasise, you don`t have all day to deal with tax compliance works, especially in an environment that keeps changing weekly basis, catching up with the updates is a full-time job! MTD for VAT, however; is a major update that we`ve been warning you since late 2018.
Tax has gone digital
It is basically an initiative, introduced by HMRC for VAT registered businesses in all shapes and sizes to return their VAT through a compatible software to themselves. Major benefit? Reducing the paperwork, also to consolidate HMRC VAT processing onto a single, modern platform and it`s only the beginning of a series of digital amendments.
Take a look at the chart above (source: The Rt Hon Karen Bradley MP, Secretary of State for Culture, Media and Sport)
Your software vs. MTD compatible software!
You make the mistake the moment you tell yourself “We`ve already got the software to get these things done, we don`t need to have an MTD compatible tool to return VAT.” We`re afraid this thought caused thousands of small businesses to fail in this digital initiative.
SME owner? Then this is for you!
Overall, 346.000 small businesses think they`re MTD compliant, yet they`re actually not. Quickbooks thinks the confusion occurs because companies that are already operating digitally believed that there was nothing more to do. They tend to think they`ve been making their VAT returns through government gateway online, so they`ve already been converted to digital taxation. Well, that is a mistake.
Yet again you`re not alone, as you can see on the table chart below, VAT registered businesses in growing numbers and MTD applies them all! (source: Office for National Statistics)
Yet SMEs often resist change
MTD for VAT officially kicked off at the 1st of April just gone, straight after, HRMC warned all VAT registered businesses to set themselves up with an MTD compatible software, adding up there`ll be a “Soft Landing” period for about 1 year as of 1st of April.
HMRC is busier than usual!
It was, however, just a trailer of the actual movie. As are the next two filing deadlines this month and in July. The real test will come on August 7 when the biggest wave of the 1.1 million-affected VAT registered businesses are mandated to file under the new digital platform for the first time.
There will be two major waves both in July and August and HMRC`s MTD for VAT helplines` average waiting time is already 2 hours. Yet again HMRC deserves applause, as it is not easy to operate such a major change in taxation on the verge of Brexit.
And it begins!
This has just been a tip of the iceberg so far, the real challenge is to kick off after August when the second testing completed, afterward, registration will become mandatory in a year.
Having said that, as a small business owner, you are already hectic with the daily grind, but try not to shelve your MTD for VAT registration for too long. For additional reading, you can have a look at our other article about MTD for VAT.