Only a fraction of UK businesses mandated to join Making Tax Digital in April have registered for it, a Freedom of Information (FoI) request by Edinburgh-based cash flow forecasting firm, Float, has revealed.
Just 4% of businesses have registered thus far, despite MTD coming into force on the 1st of April. Similarly, statistics detailed in the FoI show suggest that only 2% of accounting firms have registered any clients for Making Tax Digital from an estimated 72,000 tax ‘agents’ across the UK.
A key stumbling block for businesses, according to Float, is a lack of concise information on MTD and widespread confusion over what action needs to be taken to ensure compliance. The firm argues that the registration process is confusing and that HMRC isn’t doing enough to alert businesses of the change in the law.
Slightly more than 55,000 (accurate as of Monday 18 March 2019) businesses have registered for MTD to date, the FoI shows. However, this represents a tiny fraction of the 1.2 million businesses across the country who will be mandated to join.
Of this figure, only 13,000 firms were signed up by ‘agents’, which means the majority of businesses who registered did so independently. This is despite that fact that 88% of VAT registered businesses with a turnover above the VAT threshold use an external agent to manage their tax affairs – although HMRC points out that represented businesses can sign up to MTD directly and not through an agent.
Most concerningly for UK businesses, if the current MTD registration rate continues (HMRC estimates around 3,000 registrations per day) then only 402,000 more businesses will have registered by 7th August, when the first digital quarterly VAT returns are due for submission.
Colin Hewitt, CEO and co-founder of Float, said that key problems for businesses are their reliance on accountants to communicate what is required, as well as a ‘reactive rather than proactive’ approach among accountancy firms themselves.
“The Making Tax Digital deadline is fast approaching, and the vast majority of businesses are still unaware of what is required of them,” Hewitt said. “While many businesses will have heard of MTD, they are busy running their businesses and often rely on their accountants to communicate what they need to do.
“Sadly, many accountancy firms are still very much reactive rather than proactive, and won’t have done more than sending a few emails which will probably be sitting buried in inboxes across the country.”
Hewitt noted that, while leniency on HMRC’s part is expected, the opportunity for businesses to modernise accountancy and bookkeeping practices should not be viewed as a burden.
“I’m confident that HMRC will show leniency with businesses who are late to register, and step up the communications on what is required,” he said. “Many businesses are using MTD as an opportunity to finally move from legacy software or spreadsheets to a fully-fledged cloud accounting solution, and this can take time.
“So, businesses shouldn’t look at MTD as a threat or a burden. It’s an opportunity for businesses to modernise, a task that many need to do urgently anyway. Sometimes there needs to be a line in the sand, a catalyst that forces change, and MTD is exactly that.”