3,800 businesses miss VAT deadlines due to MTD struggles

3,800 businesses miss VAT deadlines due to MTD struggles

National accountancy group UHY Hacker Young have said that 3,860 businesses have missed the deadline, and almost 600,000 businesses out of 1.2 million still need to sign up to MTD.

3,800 businesses miss VAT deadlines due to MTD struggles

Over 3,800 businesses have fallen at the first hurdle and missed the April, May and June 2019 VAT return deadlines because of struggles with Making Tax Digital (MTD).

National accountancy group UHY Hacker Young said that 3,860 businesses have missed the deadline, and almost 600,000 businesses out of 1.2 million still need to sign up to MTD. This figure is likely to rise after last week’s August 7 VAT return deadline.

Sean Glancy, VAT and Indirect Taxes partner at UHY Hacker Young, said: “A sudden overhaul of the long-standing VAT return system has come as a shock for many businesses. Thousands have already missed the boat and failed to file their VAT returns under MTD.

“HMRC has promised that the digitisation of VAT returns will benefit businesses in the long run. However, with rising technological and staffing costs, many companies will feel they are getting a rough deal.”

Roadblocks to adoption

Businesses that sign up to MTD must adopt HMRC approved accounting software to comply with the new VAT returns process, and one of the key issues faced by businesses is that they are struggling to use this new software correctly.

Compliance can also be costly for businesses, with some of the software that is HMRC approved costing as much as £1000 to install.

Added costs of training existing staff to use such software, or hiring new staff that can already operate the software, has also proved a costly roadblock to businesses adopting MTD before the deadlines.

Adoption issues could intensify as companies with more complex VAT returns, such as charities, had to have filed their VAT returns by the August deadline that has just passed. Providing businesses act in good faith, HMRC has said they will not levy fines for those who miss the MTC deadline.

However, this is likely to change as HMRC will have to begin imposing the same penalty system as outlined under the previous VAT return process to ensure businesses file on time.

These fines operate on a cumulative basis and increase depending on how many times a business has defaulted on its VAT returns in 12 months and can rise as high as 15% of the total amount of VAT due if a business has defaulted more than six times in 12 months.

HMRC can also impose penalties of up to 100% of any under-stated or over-stated VAT if businesses send a return that contains a ‘careless or deliberate’ inaccuracy.

Sean Glancy adds: “We could see even more businesses suffer from using new systems that many are finding hard to acclimatise to.

“HMRC has adopted a light touch against businesses missing their VAT deadline under MTD. However, this will not always be the case – future late filings will be punished.”

Businesses under-prepared

As reported last week, according to a YouGov poll, businesses do not feel prepared for the change Making Tax Digital brings, with 57% saying they felt ‘unprepared’ and only 12% said they were ‘very prepared’.

The poll also found that 28% of small companies are worried that they will have to spend more money on tax affairs, while 12% of bosses say that they have not even heard of the new initiative, despite deadlines having passed.

Read more about the YouGov poll here.

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3m

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

7m

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

2m

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

3m

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource