There is a high level of awareness of the upcoming introduction of Making Tax Digital (MTD) for VAT among businesses and tax professionals, and the number of businesses making preparations gives us confidence that the vast majority will be ready. Over 43,000 businesses have already joined the pilot service, with thousands more joining every day.
In research carried out in December 2018, 8 in 10 VAT mandated businesses were aware of MTD either by name or concept. Of those who were aware, 83% had already started to prepare.
It’s important to note that the 1st April deadline is not a cliff edge by which time businesses need to have signed-up. The first returns for most businesses under the new system won’t be due until August at the earliest.
HMRC has been working closely with the software industry so that businesses will be able to choose products that suit both their budget and their needs. That includes software which has been developed specifically to support different types of sector and ‘bridging software’ to allow businesses to continue keeping their records in spreadsheets if they prefer.
HMRC’s comprehensive Impact Assessment, developed in consultation with external stakeholders and informed by both quantitative and qualitative evidence, anticipated net ongoing software costs of £37m for those businesses needing to operate MTD. Costs will vary by individual business, with some providers offering free software and over 140 existing subscription products are being updated at no cost at all.
We recognise that businesses will require time to become familiar with these new requirements. As confirmed at Spring Statement, during the first year of VAT mandation we are committed to taking a light touch approach to penalties. HMRC will not issue record keeping or filing penalties where businesses are doing their best to comply with MTD.