Over a third of companies totally in the dark about HMRC’s controversial new tax scheme
Following a call by the House of Lords to delay the government’s rollout of a key new tax policy, a survey has found over a third of businesses have not even heard of the scheme.
With just over five months until the deadline for companies to digitise their VAT tax processes as part of the Making Tax Digital (MTD) scheme, 36 per cent of companies were “completely unfamiliar” with the new regime, according to research by accountancy firm Moore Stephens.
The MTD scheme makes it compulsory for companies to submit sales tax records to HMRC electronically, to reduce human error.
It has been slammed by politicians and sector bodies, with an excoriating House of Lords report on Thursday calling its roll out “rushed” and saying poor communication from tax authorities had caused “considerable frustration amongst taxpayers”.
HMRC recently conceded the deadline was unrealistic, and delayed its rollout for several groups, including charities, public sector entities and VAT groups, but small and medium enterprises (SMEs) still have to comply with the current deadline in April next year.
The Lords report said HMRC had “neglected” its duty to support SMEs with the implementation of the policy. It recommended MTD be delayed by “at least one year”, and said “by failing to properly engage with small businesses, HMRC risks alienating them from any future modernisation of the tax system”.
Moore Stephens’ research found that nearly half the SMEs it surveyed had no plan in place for meeting the MTD deadline, with many preoccupied with Brexit contingency planning.
Nick Warner, VAT partner at Moore Stephens, said: “Many businesses simply lack the time and resources to prepare for Brexit and Making Tax Digital at the same time.”
“Businesses swamped with preparations will welcome the delay to the deadline – but HMRC should be extending the deadline for all businesses,” he added. “If a business’s preparations for MTD are already underway, this is not a reason to suspend implementation – six months is a very short extension.”
An HMRC spokesperson said: “We have already written to 200,000 businesses and will be writing to every other mandated business in the coming weeks to ensure they know about the changes and how to prepare.”