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Businesses feel underprepared for Making Tax Digital VAT deadline

Businesses feel underprepared for Making Tax Digital VA

Nearly two thirds of businesses (64%) say that Making Tax Digital is a good idea but that they need more support with their plans ahead of the deadline of April 1st 2019 for VAT, according to new research from KPMG.

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Making Tax Digital is a key part of the government’s plans to make it easier and more effective for individuals and businesses to get their tax right and keep on top of their affairs.

From 1st April 2019, most VAT-registered businesses above the threshold of £85k will have to keep digital records and submit VAT returns using compatible software (a small percentage of businesses with more complex needs are deferred to October 1st 2019). After a soft-landing period of a year, a further requirement for digital links throughout the VAT return process, or a digital audit trail, will be required until the deadline of 31 March 2020.

As part of the research, 1000 businesses were asked which statement best described their attitude to Making Tax Digital and the 2019 deadline to comply with the new VAT legislation.

The results showed that:

  • Almost two thirds (64%) said that it is a good idea but that they need more support
  • Almost a fifth (19%) said that it offers their business no benefit
  • 12% were supportive and ready for the deadline
  • 5% said that it would be damaging to their business

Chris Downing, Tax Partner at KPMG said: “With just over a month to go until the deadline, it’s worrying to see that almost two thirds of businesses say that they need more support and are still in the process of working out what they need to do. This could potentially be both costly and time-consuming, depending on the changes that need to be made.

“Although 98% of VAT registered businesses already file VAT returns electronically, Making Tax Digital (MTD) will involve significant changes to their existing processes. For example, keeping digital records, maintaining a digital audit trail of all business transactions, and implementing new software to submit their VAT returns digitally.

“Once businesses have made those changes, then they also need to think about the flexibility of their systems and processes to meet potential future requirements under MTD. HMRC are seeking to become the most digitally advanced tax administration in the world. We are likely to see provisions for income tax and corporation tax further down the line.”

NOTES TO EDITORS

  • For media queries please contact Ed Fotheringham Smith, PR Manager, 07920 572490 or Edward.FotheringhamSmith@KPMG.co.uk
  • The survey was completed by 1,000 businesses in December 2018 and January 2019 as part of KPMG’s forthcoming Backing Business Growth survey. The sample size included:
    • 250 companies with an annual turnover of £10m - £49m
    • 250 companies with an annual turnover of £50m - £90m
    • 250 companies with an annual turnover of £100m - £199m
    • 150 companies with an annual turnover of £200m - £299m
    • 100 companies with an annual turnover of £300m - £750m
  • KPMG will be hosting a webinar “Making Tax Digital for VAT, is your business ready?” on Wednesday 6 March 2019 at 1pm. KPMG's VAT and technology experts Chris Downing, Reece Duncan and Joost Willemsen will provide practical advice on how to prepare for the 1st April. Businesses can join through this link.
  • For further information please go to https://home.kpmg/uk/en/home/insights/2018/07/making-tax-digital-for-vat.html

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 16,300 partners and staff. The UK firm recorded a revenue of £2.338 billion in the year ended 30 September 2018. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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