HMRC warns small firms on digital VAT deadline with two-thirds still to register

Companies with less than £85,000 of taxable revenue must switch to online system from next fiscal year

Credit: Mohamed Hassan from Pixabay

With the deadline looming in less than three months, HM Revenue and Customs has urged small firms to register to make their VAT payments through the Making Tax Digital system.

For VAT payments covering trading periods beginning from the next financial year – which commences on 1 April – all companies with taxable revenue must switch to the digital system. For the first time, this will include firms with sales below the current threshold of £85,000 per year.

Only one in three of these businesses have thus far done so, HMRC indicated. Those that have not are urged to follow the lead of the “thousands more [that] are signing up each week”.

Reminders are being issued to all firms in scope of the MTD expansion, and the department is also hosting a series of webinars to help small business owners get up to speed with the requirements of the digital system.


Related content

HMRC said that it “recognises that some businesses will experience upfront costs in joining Making Tax Digital” but added that there are “a range of compatible software products… allowing businesses to choose which tools they use to run their business and tax affairs”.

There are well over 500 software programs certified by HMRC as compatible with MTD, including 22 that offer a free option.

An exemption from using the digital system can be applied for by firms that can demonstrate that “it is not reasonable or practicable for them to use digital tools for their tax”.

Joanna Rowland, HMRC’s director general for transformation, said: “Making Tax Digital is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital. By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs. We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.”

Businesses with taxable revenue in excess of £85,000 per year have been required to use Making Tax Digital since 2019. HMRC claims that 1.6 million entities have registered for the system to date, with a cumulative total of more than 11 million VAT returns having been filed digitally. 

Mike Cherry national chair of the Federation of Small Businesses said: “We have worked hard to ensure Making Tax Digital launch dates were adjusted to give small businesses more time to prepare and allow more competition to open up in the accounting software market. It’s important that firms do all they can to get ahead of deadlines and access the affordable platforms that are now available; if they are members of FSB, they will have access to a new easy Making Tax Digital member service that we are creating. We’ll continue to work with government, and through our support services, to minimise the admin and cost impacts of Making Tax Digital on small firms whilst unlocking the productivity gains the initiative could bring.”

 

Sam Trendall

Learn More →

Leave a Reply

Your email address will not be published. Required fields are marked *