Pilot for digital tax accounts fails to take off

Freelancers’ VAT uncertainties – flagged up in light of Brexit – may be motivating another issue the government will be quietly keen to resolve -- poor adoption of its MTD pilot.

Speaking to sole traders about research designed to tempt them to take the plunge into digital accounts, HMRC let on that take-up of the pilot scheme is currently as low as 3 per cent.

Put another way, only 16,500 smaller businesses have so far signed up to trial Making Tax Digital (MTD) -- out of the 500,000 that were invited to by the Revenue back in October 2018.

Anita Monteith, at the Institute of Chartered Accountants in England and Wales says that, if she were HMRC, she would be “concerned” by the pilot’s “low take-up,” the Times reported.

Perhaps more concerning is that, within only about six weeks, digital VAT filing through a HMRC portal needs to be in place for as many one million smaller traders.

With turnovers in excess of the current VAT threshold (£85,000), such businesses will need to use either MTD-compatible software or spreadsheets loaded with ‘bridging software.’

HMRC has pledged to write to all those affected by the end of this month, yet it also says, “no business will be forced to go digital for their VAT returns if they are unable to.”

As for freelancers and other businesses which are registered for VAT but are below the VAT threshold, they are not required to use the MTD service, but can choose to do so.

For the required, HMRC has reassured that for the first year, it will take a “light-touch” approach to penalties for those “doing their best” to meet their obligations of the new system.

 

27th February 2019

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