According to the latest industry research, thousands of businesses are struggling to get to grips with Making Tax Digital (MTD).
More than 3,800 businesses have struggled with the changes and have missed the first deadline to file VAT returns for April, May and June. Whilst almost 600,000 businesses still need to sign up to MTD.
A recent You Gov poll found that businesses do not feel ready for the change Making Tax Digital brings, with 57 per cent claiming they felt ‘unprepared’ for the new system.
The same poll also revealed that 28 per cent of small businesses are concerned that they will have to spend more money on tax affairs, while 12 per cent of bosses say that they have not even heard of the new initiative, despite deadlines already passing.
Businesses that sign up to MTD are required to use accounting software approved by HMRC to comply with the new processes, this is proving to be a key issue for many businesses as they are struggling to use the new software correctly.
Adopting the new systems is proving to be a costly task for some, with software costing as much as £1,000 to install, followed by additional costs of training existing staff to use the software or hiring new staff members that are capable of using it correctly.
With many businesses experiencing teething problems, HMRC has announced they will not levy fines for businesses that miss the deadlines, provided they have acted in good faith.
This will eventually change as businesses get to grips with the system, with HMRC planning to impose the same penalty system used under the previous VAT return processes to ensure businesses meet deadlines.
The level of fines will depend on how many times a business has defaulted on its VAT returns over 12 months and could be as high as 15 per cent of the total amount of VAT owed if a business defaults more than six times during that period.
There will also be penalties of up to 100 per cent for any businesses who file returns containing careless or deliberate inaccuracies.
For help and advice with any aspect of Making Tax Digital, then contact our expert team today.