As new research finds an “alarmingly” high number of business owners remain unaware of Making Tax Digital, a trade body has called for a delay to the tax initiative until 2020/21.
After surveying over 1,1000 business owners just ten months ahead of the government’s flagship tax plan, the British Chambers of Commerce (BCC) found that one in four had never even heard of Making Tax Digital. Two-thirds knew only some details about it.
Meanwhile, just 10% of firms knew “a lot of details” about the switch to a digitised tax system.
What is going to change?
From April 2019, all VAT-registered businesses will have to maintain and submit all VAT records digitally. Of those who are aware of the switch, just 25% have begun making preparations.
The BCC has raised concerns as Making Tax Digital will require business owners to have compatible software in place that can connect to HMRC’s systems via an Application Programming Interface (API). It warned that this is a “much more complex” process for businesses than the current manual VAT returns.
Mike Spicer, director of economics and research at BCC, made the case to delay Making Tax Digital until the 2020/21 tax year for large and small firms.
“The government’s aim to modernise the UK’s tax system is admirable, but in view of low business awareness and the impending challenges of Brexit, it would make sense for HMRC to delay the implementation of Making Tax Digital in order to get this change right,” he said in a statement.
“We are concerned that far too many firms still aren’t clear on what Making Tax Digital is, or what it means for their operations.”
“With just months to go before the deadline, these knowledge gaps could make the timeline for change unworkable for many firms.”
The BCC claimed a delay would give HMRC the “breathing space” to engage with businesses and help them ensure the necessary software is in place. Given the timing of the Brexit process – Making Tax Digital is due to rolled-out just days after Britain leaves the EU – the trade body believes a delay would allow HMRC to free-up its capacity.
Spicer added: “Ministers must face up to the reality of the pressures facing HMRC and delay the introduction of Making Tax Digital for all businesses for the next financial year. This would allow the Revenue to focus its immediate attention on supporting businesses through the Brexit process, which must be a key priority.
“When Making Tax Digital is implemented, the acid test will be whether it ultimately creates a simpler and more efficient tax system, or yet more onerous administrative burdens that stifle the growth of UK firms.”