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Half of businesses still need to sign up to this controversial tax reform before August deadline

2-minute read

Sam Bromley

19 July 2019

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Although 1.2 million businesses are affected by the changes, only half had signed up as of 11 July.

Since 1 April, businesses with a taxable turnover above £85,000 have been required to keep digital VAT records.

With a quarterly tax return due on 7 August, HMRC is urging affected businesses to sign up to the new scheme.

Making Tax Digital – what do businesses need to do?

Making Tax Digital came into force on 1 April.

Affected businesses have needed to keep digital records since the change. If you have to comply, you can do so by using a compatible software package, or by using ‘bridging software’, which connects non-compatible software (like spreadsheets) to HMRC’s system.

After you have the software, you can go ahead and sign up for Making Tax Digital with HMRC.

You’ll need your Government Gateway ID and password – plus company information if you’re a limited company, or your National Insurance contributions number if you’re a sole trader.

What’s the 7 August deadline?

If you're on board with Making Tax Digital, you also need to submit your first quarterly tax return by 7 August.

If paying by direct debit, though, you should sign up by 27 July.

HMRC says 10,000 businesses are registering for Making Tax Digital daily and 400,000 submissions have already been successfully made.

But the tax body has also implied there’s lots of businesses yet to sign up. It announced on 11 July that ‘more than 600,000 businesses’ have signed up in total, meaning there’s a substantial shortfall.

It noted that farmers have been quick to go digital – more than 50 per cent of businesses in the agricultural sector have already signed up. But the financial sector has been surprisingly slow, with three quarters yet to do so.

If you haven’t signed up yet, make sure you do sooner rather than later using the link above – although Theresa Middleton, Director of Making Tax Digital at HMRC, said: “During this first year we won’t be issuing filing or record keeping penalties to businesses doing their best to comply.”

Why is Making Tax Digital controversial?

In late 2018 the House of Lords called for a delay to Making Tax Digital, saying that businesses wouldn’t be ready in time. The slow uptake seems to prove this correct.

And the government came in for more criticism in early July, as the Telegraph reported that government departments, NHS trusts and the Royal Household don’t have to comply with the changes.

HMRC had already confirmed that public sector bodies using the ‘Government Information and NHS Trust service’ (Giant) would be exempt, but following the Telegraph report, it said it is “currently reviewing VAT refund rules for the public sector. This review is still underway and we will need to consider the outcome in the context of the switch to Making Tax Digital for this group."

Alongside introducing new off-payroll working rules for the private sector, are HMRC trying to do too much too quickly – and is it fair to expect businesses to keep up? Have your say in the comments below.

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