Put back digital accounts until 2020, taxman told

A tiny traders' group says digital tax accounts for contractors and other small businesses should suffer the same likely fate as Budget 2018 -- get delayed.

The British Chambers of Commerce is justifying its call to shelve Making Tax Digital for all businesses until 2020/21 because as many two-thirds 'only know what it is by name.'

Put another way, MTD needs postponing because right now, as many as 66% of traders "know it only by name or some details about it," shows a BCC poll of more than 1,000 businesses.

A quarter of these small enterprises are even more 'in the dark,' with 24% who stand to be affected by MTD saying they have simply 'never heard of it.'

And even among those who did emerge as being aware of the incoming digital tax accounts, about the same proportion (25%) said they had made 'no preparations.'

"This is a concern as MTD will require VAT-registered firms to have MTD-compatible software in place that can create a VAT return and connect to HMRC systems via an API," the chamber said.

"This is a much more complex process for businesses than the current online process of manual completion of VAT returns. "

In line with the alert, all VAT-registered businesses will have to maintain digital records for VAT and submit their returns digitally from April 2019.

This timeframe is problematic in the eyes of the BCC for two reasons.

Not only is MTD's commencement date just a few days subsequent to when the UK is meant to be leaving the EU, but it also means all business owners have only 10 months (from now) to get ready for what's been called the biggest ever shake-up to accounting.

Ominously, of those firms who said they were aware of MTD, only 6 per cent of them told the chamber that they had approached HMRC for advice.

The BCC's Mike Spicer said: “We are concerned that far too many firms still aren’t clear on what Making Tax Digital is, or what it means for their operations.

"With just months to go before the deadline, these knowledge gaps could make the timeline for change unworkable for many firms."

He added that delaying MTD for all traders would give HMRC "breathing space" to engage effectively with businesses and ensure that the necessary software is in place.

The department could also use the extra time to raise levels of awareness about the impending changes, on top of the steps it has already taken -- internally -- to free-up capacity.

The chamber said: "Businesses remain concerned that HMRC may still lack the resources to deliver MTD at the same time as supporting firms through the Brexit process, as well as day-to-day compliance issues."

However, Spicer suggests that properly putting in place MTD is only half the battle.

“When Making Tax Digital is implemented, the acid test will be whether it ultimately creates a simpler and more efficient tax system or yet more onerous administrative burdens that stifle the growth of UK firms,” he said.