Small businesses believe Making Tax Digital will have a long-term positive effect

One in four decision makers working for small and medium-sized enterprises (SMEs) say they believe that Making Tax Digital (MTD) will have a positive impact on their business in the long-term (i.e. in five years’ time), although some of those affected are still unprepared for next week’s launch.

As of Monday 1 April, MTD for VAT (MTDfV) comes into force for VAT-registered businesses with VAT taxable turnover that exceeds the £85,000 compulsory VAT registration threshold; meaning those businesses will need to keep records digitally and submit all future VAT returns using MTD-compatible software.

26% of over 1,000 small and medium-sized business decision-makers who took part in the YouGov survey said that the process to move taxes onto a digital platform would be a good thing for their business within the next five years.

Only 16% believed it would have a negative impact, while nearly half (46%) said it would make no difference.

 Brian Palmer, Tax Policy Expert, AAT said:

“HMRC believes that when Making Tax Digital has been fully rolled out, it will ultimately make complying with tax return filing obligations easier for small businesses individual taxpayers and even HMRC itself. The launch of MTDfV is merely the first step along the road to HMRC achieving its ambition to completely digitise the UK tax system. I believe that the real benefit to business arising from digital accounting will be access to near limitless real-time information at the press of a button. This will empower businesses and tax payer to proactively plan their finances more effectively in the future.”

Worryingly, of SME businesses affected by MTDfV, over one in ten (11%) called themselves very or extremely unprepared (rating themselves 1,2 or 3 out of 10 in terms of preparedness, where 1 is extremely unprepared) for the new scheme to come into force, while around one in seven SMEs (15%) didn’t know how prepared they are.

More than one in two (56%) of SMEs affected by MTDfV were fairly or extremely prepared (rating themselves between 7 and 10 out of 10 in terms of preparedness, where 10 is extremely prepared).

Brian Palmer added:

“While it’s clearly a concern at this late stage that some small businesses are totally unprepared for the first phase of MTD, there is still some time for them to prepare. The vast majority of those businesses affected by MTD for VAT won’t have to submit their first return until well after the end of the first quarter of the 2019-20 tax year, sometime around the end of July or even early August. This means that there is still the opportunity to sort a digital software provider, or speak with an accountant who can help you get on the right path.”

An earlier survey for AAT conducted amongst MPs showed that nearly half (43%) believed MTD would have a positive effect on SMEs, with only 15% disagreeing with this statement.