Press release: Tax digitalisation – progress welcome, but more clarity and guidance needed

“It is good that progress is being made on awareness of MTD, though one in five affected businesses remain completely unaware of it and many of those that are aware are hazy on the details. There is a lot more work needed over the coming months.

“Accordingly we would have liked the minister to have announced a one year deferral of mandation in order to allow businesses more time to prepare, especially during these challenging times.

“The theory behind Making Tax Digital is broadly sound. A move to digital record keeping and submissions is logical and will ultimately be more efficient. But it should be allowed to grow organically, with systems created that are attractive enough that businesses choose to migrate to them, as has happened with online filing more widely.

“We note that by far the most common way those who are aware of MTD have been made aware is by their tax adviser or accountant. We and our members will continue to do what we can to raise awareness over the months ahead but it is likely that many of those who remain unaware will be businesses who do not get external tax advice and will therefore be harder to reach.

“HMRC still need to provide more clarity around how HMRC will enforce mandation in the first year. We are assured there will be a light touch on penalties, which is good, but some of the details remain unclear.

“And since the government are not prepared to defer mandation they should at least be clear that they will not penalise people making genuine efforts to prepare for MTD but who, within the first year, stick with the old VAT filing system until they are confident that the new software is working properly for them.

“Whilst HMRC’s recently commissioned survey results indicate that half of VAT mandated businesses said they planned to sign up to MTD before the April 2019 deadline, signing up before fully ready will cause significant problems and needs to be timed correctly.¹

“Finally, we are still waiting for HMRC to publish the detailed guidance to explain when someone might be able to claim exemption from the new rules and how they should do this. This needs to be published urgently. In the meantime some will be worrying unnecessarily about how they are going to cope with the new regime, while others will be left with very little time to prepare if their application for an exemption is turned down unexpectedly.”