The government’s plans to make it easier and more effective for individuals and businesses to get their tax right and keep on top of their affairs are creating challenges for UK companies.
According to research from accounting giant KPMG, nearly two thirds of businesses (64%) say that Making Tax Digital is a good idea but that they need more support with their plans ahead of the deadline of April 1 2019 for VAT.
From that date, most VAT-registered businesses above the threshold of £85k will have to keep digital records and submit VAT returns using compatible software (a small percentage of businesses with more complex needs are deferred to October 1st 2019).
After a soft-landing period of a year, a further requirement for digital links throughout the VAT return process, or a digital audit trail, will be required until the deadline of 31 March 2020.
As part of the research, 1000 businesses were asked which statement best described their attitude to Making Tax Digital and the 2019 deadline to comply with the new VAT legislation. The results showed that:
- Almost two thirds (64%) said that it is a good idea but that they need more support
- Almost a fifth (19%) said that it offers their business no benefit
- 12% were supportive and ready for the deadline
- 5% said that it would be damaging to their business
Chris Downing, tax partner at KPMG said: “With just over a month to go until the deadline, it’s worrying to see that almost two thirds of businesses say that they need more support and are still in the process of working out what they need to do. This could potentially be both costly and time-consuming, depending on the changes that need to be made.
“Although 98% of VAT registered businesses already file VAT returns electronically, Making Tax Digital (MTD) will involve significant changes to their existing processes. For example, keeping digital records, maintaining a digital audit trail of all business transactions, and implementing new software to submit their VAT returns digitally.
“Once businesses have made those changes, then they also need to think about the flexibility of their systems and processes to meet potential future requirements under MTD. HMRC are seeking to become the most digitally advanced tax administration in the world. We are likely to see provisions for income tax and corporation tax further down the line.”