HMRC’s incoming Making Tax Digital for VAT (MTD) is the most significant change in a generation to how businesses approach tax compliance.
More than 1.2 million UK businesses will be affected. A recent report by the House of Lords Economic Affairs Committee states some 400,000 companies are still not aware they will have to file VAT returns through software from April 2019. Our own research suggests up to a third of businesses believe submitting their returns via HMRC’s website still constitutes MTD compliance.
It is vital to allay confusion around MTD and help businesses seamlessly navigate this change. It is possible to do so through the lens of opportunity.
The backbone of the economy
The UK’s small businesses – and in particular the VAT registered SMEs that will be affected by MTD this coming April – are the backbone of the economy. According to the Federation of Small Businesses, 99.9% of all private sector businesses at the start of 2018 were small or medium-sized, and total employment in SMEs was 16.3 million.
The UK’s SMEs remain hungry for growth. The way they respond to transformation and the scope and scale of technological change will dictate their prosperity and future success.
MTD is a gateway to advancing technological change and the efficiencies digitalisation can bring to a company’s operations. This in turn will reduce the risk of UK businesses lagging behind in an increasingly competitive economic landscape.
Immediate advantages of MTD-ready software include a real-time view of financial health, time-saving and a reduction of errors. This is thanks to automating manual bookkeeping endeavours. Longer term, it introduces the broader role technology can play in an existing corporate strategy.
Today, digitalisation touches every aspect of our lives and is changing the way we live. We already use the internet to shop, do our banking, and communicate with the government and it is a natural step that technology and accounting software should be used to handle taxes, instead of relying on paper ledgers or stashing receipts in a shoebox.
The United Nations’ most recent ICT Development Index placed the UK as the fifth most technologically advanced nation in the world, and if we are to remain at the forefront of pioneering expertise, MTD must to be viewed as an opportunity for our businesses.
Technology will continue to play an ever-increasing role in a business world that demands more flexibility and innovation.
The UK’s SMEs are a driving force behind our economy, and it is important we help them understand the opportunities Making Tax Digital for VAT can open up to help scale-up their business and profitability.
That is why it is in everyone’s interest to embrace Making Tax Digital for VAT ahead of April’s deadline.
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