Float, the cash flow service for Xero, QuickBooks Online and FreeAgent, today announced the results of a Freedom of Information request sent to HMRC, revealing that only a fraction of UK businesses mandated to join Making Tax Digital from April have registered (just four percent). Likewise, the data suggests that only two percent of accounting firms have registered any clients for Making Tax Digital, from an estimated 72,000 tax ‘agents’ nationwide.
Float believes that many businesses are still unaware of MTD or are uncertain of what action needs to be taken to become compliant. The company argues that the MTD registration process is confusing and that HMRC have much more to do to alert businesses to the change in the law. Key FOI findings include
Only 55,250 businesses have registered for MTD to date (which comes into force on the 1st of April 2019)
“The Making Tax Digital deadline is fast approaching, and the vast majority of businesses are still unaware of what is required of them,” said Colin Hewitt, Float CEO and co-founder. “While many businesses will have heard of MTD, they are busy running their businesses, and often rely on their accountants to communicate what they need to do. Sadly many accountancy firms are still very much reactive rather than proactive, and won’t have done more than sending a few emails which will probably be sitting buried in inboxes across the country. While solutions like Xero and Quickbooks have been very proactive in telling their customers about MTD, it’s obvious from the data that businesses haven’t yet responded to the registration process required.
- HMRC says there are 1.2m businesses in the UK who will be mandated to join MTD
- Of this figure, only 13,427 businesses were signed-up by ‘agents’, meaning the majority of businesses who registered for MTD did so independently.
- This is despite the fact that 88% of VAT registered business with a turnover above the VAT threshold use an external agent to manage their tax affairs (although HMRC points out that represented businesses can sign up to MTD directly and not through their agent)
- Only 1,679 agents have signed up clients to MTD so far – while HMRC estimates that there are 72,000 agents acting for clients in the UK
- This suggests that only two percent of accounting firms have taken proactive steps to prepare for Making Tax Digital and register clients
- If businesses continue to register for Making Tax Digital at their current rate (HMRC estimates 3,000 registrations per day) only 402,000 more businesses will have registered by 7 August, when the first digital quarterly VAT returns are due for submission – still a minority of VAT registered businesses
“I’m confident that HMRC will show leniency with businesses who are late to register, and step up the communications on what is required. Many businesses are using MTD as an opportunity to finally move from legacy software or spreadsheets to a fully fledged cloud accounting solution, and this can take time. So, businesses shouldn’t look at MTD as a threat or a burden. It’s an opportunity for businesses to modernise their accounting and bookkeeping practices, a task that many businesses need to do urgently anyway. Sometimes there needs to be a line in the sand, a catalyst that forces change, and MTD is exactly that.
“To fulfil MTD requirements properly, businesses need to look at registration today if they haven’t already – embracing its adoption rather than fighting it. If you haven't reviewed your VAT process, methods and software, you should. Will your current approach enable you to submit the required VAT information through the MTD gateway? Also, if your accountant isn’t able to advise on MTD now, this should be a red flag and it might be time to start looking for new representation.”