Businesses not prepared for digital tax plans

Plans to introduce a digitised tax system should be delayed amid a widespread lack of awareness about its impending introduction, a major business organisation has claimed.

The British Chambers of Commerce says an ‘alarmingly high proportion’ of UK businesses have ‘little or no awareness’ about HMRC’s ‘Making Tax Digital’ project, which is due to be implemented in April next year.

With less than a year to roll-out, the chambers analysed survey results from more than 1,100 businesses in partnership with Avalara, to see how prepared firms are for making the switch.
It found a quarter (24%) have never even heard of Making Tax Digital, while 66% are only aware of it by name or know basic details.

Making Tax Digital from April 2019

From April 2019, all VAT registered businesses will be required to make digital records for VAT and submit returns digitally. Of those who are aware of the change, a quarter have made no preparations at all, yet businesses will need to have the more complicated, Making Tax Digital compatible software in place. This software can create a VAT return and connect to HMRC’s systems via an Application Programming Interface (API).

Businesses have also reported low levels of help and support from HMRC and fear it may lack the resources needed to deliver Making Tax Digital just days after the UK leaves the EU.

The findings have prompted the British Chambers of Commerce to call for a delay in the implementation of Making Tax Digital until the start of the 2020/21 financial year.

This, it claims, would give HMRC more room to engage with businesses, raise awareness and ensure the necessary software is in place.

‘Timeline for change unworkable’

Chris Plant, Director at the Chambers of Commerce, 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.”

‘Manual spreadsheets fall foul of new requirements’

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.”