Just one in three businesses sign up for MTD as the deadline approaches

Many businesses appear to be leaving it late before making the switch to Making Tax Digital (MTD) for VAT.

New figures from HM Revenue & Customs (HMRC) reveal that fewer than one in three VAT-registered businesses with a taxable turnover below the VAT threshold have voluntarily signed up so far.

MTD was launched in 2019, designed to simplify the tax system by changing the way businesses are required to account for VAT. It requires businesses to use HMRC approved software to file returns.

All VAT-registered businesses need to join the scheme regardless of income before the deadline in 2022.

Under the scheme, VAT-registered businesses that earn more than £85,000 per annum are required to file quarterly digital VAT returns using MTD-compliant software, such as Xero or QuickBooks.

Businesses with a taxable turnover below the VAT threshold can sign up but are not legally required to do so until April 2022.

But with the deadline looming, the latest research shows that fewer than one in three (30 per cent) of the smallest businesses have opted in.

VAT-registered businesses are being encouraged to voluntarily join the scheme ahead of the deadline to get to grips with digital tax and avoid penalties for non-compliance.

Separate research, published earlier this year, similarly found that two million small and medium-sized enterprises (SMEs) are still using outdated paper-based methods to complete accounting tasks.

For example, over a third (37 per cent) of small businesses continue to use physical systems, such as a “collection of photos”, to keep track of their finances, while one in 10 are using an “old shoebox” or drawer to store “essential documents”.

The report said there are so many excellent digital record-keeping options available to business owners and freelancers that keeping paper or spreadsheet-based records should be a thing of the past.

For help and advice on VAT matters, please get in touch with our team today.

Posted in Business, News.