With less than six months to go until the official start of the Making Tax Digital (MTD) initiative, many businesses are utterly unprepared for the change, risking major fines through non-compliance, research has found.
A report from Intuit QuickBooks states that half of the UK’s SMBs (50%) have never even heard of the Making Tax Digital initiative.
The accounting software provider firm recently surveyed 510 small business owners and sole traders that fall into this category, and further found that less than one in four (22%) know what they need to do to even be compliant with MTD.
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From April 1, 2022, the UK’s VAT registered small businesses and sole owners with a turnover of less than $117,000 will have to start reporting their VAT digitally.
Making Tax Digital, soon
Most of the respondents (57%) don’t know when they need to comply with MTD rules, while 59% are either unsure, or lacking confidence in managing the switch to MTD.
So far, less than a fifth (19%) started planning for the MTD deadline, while a tenth (11%) plan on leaving the task just before the deadline. Among those that haven’t started planning yet, 40% weren’t aware they needed to, a quarter (23%) don’t know where to start, and a fifth (22%) didn’t have the time to be bothered.
What’s more - a quarter (27%) of the respondents said they will “never” start planning for MTD.
Helping SMBs make tax digital
To help small businesses navigate the potentially confusing changes, QuickBooks launched its new QuickBooks Guide to Making Tax Digital – a source of “useful content and expert guidance”.
The company said it will be continually updating the guide with new resources, including Ask the Expert video Q&As, webinars, a ‘jargon buster’ glossary, case studies, and how-to-videos.
It seems as UK’s businesses have a lot on their plate. Even among companies above the turnover threshold, for which MTD has been mandatory for months now, many are yet to make the jump. Last August, a report from automated "Purchase to Pay" provider, Yooz, found that four in five businesses are simply unprepared.
For those businesses, finding compatible tax software seems to be the main issue. While a handful (3%) haven’t even considered adapting to MTD’s requirements, 12% thought about it, but are yet to start.
Making Tax Digital is the UK government’s attempt at simplifying, digitizing, and modernizing the tax reporting process. Instead of being required to file one large document every year, businesses will have to keep digital records of their accounts, using only software approved by the HMRC, every quarter.
For individuals, they are required to send the information directly to HMRC via a personal account.
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