The vast majority of Scottish SME’s are not ready for the ‘Making Tax Digital’ (MTD) revolution, according to our research across a broad section of Scottish businesses.
MTD affects VAT registered businesses including sole traders, partnerships, companies, LLPs and charities with a taxable turnover above £85,000. In limited cases there is a six-month extension, otherwise all affected businesses must comply from 1st April 2019, which means keeping digital books and records and filing VAT returns using MTD compatible software.
Only 13% of all VAT returns are currently submitted via software, highlighting the scale of change required, irrespective of other pressures businesses are currently facing. There will be a ‘soft landing’ for HMRC penalties during the first year, but only in respect of certain digital links for transfer or exchange of data between software programs or applications used in the MTD for VAT process.
Businesses will be liable for fines that will vary according to the nature, and extent, of any non-compliance. MTD is being rolled out as part of the Government’s drive to digitise the tax system and reduce some of the estimated £33bn tax gap caused by issues including error, lack of care and criminality.
Fraser Campbell, Head of Family Business at Campbell Dallas, said: “MTD is being overlooked by too many businesses and it is going to become a costly oversight if there is little change to the current low rate of engagement. The media focus on the business community is understandably Brexit-centric, however, the reality is that MTD is equally pressing, if not more so. We would urge any companies that have yet to tackle MTD to do so with some urgency.”
At Campbell Dallas we have been raising awareness around MTD for the past 2 years and have just launched a further series of seminars, drop in days and workshops across Scotland for any business requiring support to become MTD-compliant, and to understand the processes involved, and the costs of inertia.
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The information in this article should not be regarded as financial advice. This is based on our understanding in February 2019. Laws and tax rules may change in the future.