Making Tax Digital, the initiative introduced by HMRC in April requiring businesses to keep digital records for the calculation and submission of VAT returns, has met with early reluctance to register.
Whilst many businesses may have ignored the passing deadline, in the belief that they were already compliant as a result of using approved accounting software, they are being reminded of the fact that they still have to register for Making Tax Digital in order to make a return.
Despite HMRC reporting that over 3,000 businesses were registering every day in late March, by the 25th of March, just days before the rules came into force, only 4% of eligible businesses had signed up. In total HMRC says that 1.2 million businesses are required to comply.
The April 1st deadline was the date of introduction and the new rules only come into force from the first VAT period starting on or after this date. So, the first submissions are not actually required until August 7th 2019. By this time, businesses or their agents will need to have registered themselves in order to make the submission.
With nearly 9/10 companies having a nominated agent for VAT the low rate of registration is not entirely down to businesses themselves. Professional advisors and agents (normally bookkeepers and accountants) should all be aware of Making Tax Digital (MTD) and the requirement to register their clients and yet the majority of sign ups before the introduction date came from independent registrants i.e. businesses not using an agent.
HMRC is therefore bracing itself for a flood of registrations towards the next deadline, the first round of submissions under the new rules. Perhaps unsurprisingly, they are also advising against this last-minute approach, encouraging businesses and their advisers to register in plenty of time to avoid any delays and potential penalties.