Businesses aren't ready for MTD, ICAEW report reveals
A concerningly low level of businesses have implemented, or are on their way to implementing, the accountancy software, according to ICAEW report
Making Tax Digital (MTD) is the movement everyone is talking about, but many businesses have yet to fully embrace the change.
ICAEW has released research that reveals some rather alarming statistics.
The most concerning is that over 40% of businesses that will be affected by MTD for VAT are not yet aware that this will be the case, despite the fact that these changes will be mandatory from April 2019.
Although there has been a 54% increase in the number of VAT registered businesses that are using accounting software, a quarter of the businesses that will be impacted by the change are still using paper-based accounting systems.
Anita Monteith, ICAEW technical tax manager, stated: “We continue to fully support HMRC’s ambition to increase the use of digital technology, but we are concerned that, based on these results, many businesses are not going to be ready for implementation in April 2019.”
The report shows that, for the quarterly VAT return, many businesses still use the GOV.UK website. However, from April 2019, VAT registered businesses who qualify for MTD will have to use the accounting software.
38% of UK businesses now use the accounting software, which is a significant increase since 2016, but, according to the ICAEW, this is not enough.
Monteith said: “We would like to explore with HMRC what more we as business advisers can do to help. It is also clear that, even among businesses that are aware of MTD for VAT, many of them have not started to prepare to implement it. Given the need to review existing systems and potentially evaluate, purchase and test new software, this is a worry.”
Only 54% of VAT registered businesses use the accounting software, but 25% of all businesses rely solely on paper-based records – this includes 13% who will need to implement MTD for VAT by April 2019. A further 20% of businesses that will need to implement the accounting software have not yet made any preparations for it.
Monteith concluded: “We want to help make MTD a success and also ensure that businesses get this right, but time is running out. MTD for VAT is a major change in tax administration and it is important for the UK tax system that it is a success: this is too important to be rushed.”
However, with the deadline set for April of next year, more extreme measures must be taken to ensure that all qualifying businesses are prepared for change.