‘One in three’ Midlands businesses not ready for new VAT regime

Up to one-third of businesses in the West Midlands are unprepared for the changes being introduced by Making Tax Digital, according to research by RSM.

From April 1 2019 the new Making Tax Digital (MTD) system will be introduced, which will compel every business trading over the VAT threshold of £85,000 to keep their records in a digital format, make sure all their VAT activity is digitally linked and submit their VAT returns to HMRC using MTD software.

Steve Hodgetts, VAT partner at RSM said:”Making Tax Digital is one of the biggest shake ups in tax administration for over 20 years. But with just six months to go before the rules come into force , there is a worrying number of VAT -registered businesses that are completely unaware of the changes. And many of those that are aware have an awful lot of work to do to get ready.”

“VAT registered businesses really need to make the next six months count, to ensure that their software, systems and people are all ready for the change.”

All West Midlands businesses affected by these changes must ensure they are using MTD compatible software by April next year, and this must include an Application Programme Interface (API), which creates a link between the accounting software of a business and HMRC’s systems, and allows easy submission for future VAT returns.

HMRC has said it will agree a ‘soft landing’ period between April 2019 and April 2020 when no financial penalties will be meted out to firms, and there will be no mandatory requirement for a business to digital link between the accounting software which makes up its VAT return.