One in four (27%) self-employed people “know nothing” about having to switch to new VAT rules next week for the government’s Making Tax Digital scheme, according to research by IPSE (the Association of Independent Professionals and the Self-Employed).
From 1 April, when the new Making Tax Digital (MTD) rules come into force, VAT-registered companies will have to keep digital VAT records and submit electronic quarterly returns through paid-for software.
Andy Chamberlain, IPSE’s deputy director of policy, commented: “It is frightening that so many people who will be affected by this major change are still in the dark. There has been little in the way of advertising for people affected except through the businesses that are selling the mandatory software.
“The government is trying to sound supportive but it must do more to communicate the changes and guarantee that no-one will be unfairly investigated or penalised for the widespread confusion about this.”
The move to digital for VAT is just the first part of a wider programme of MTD reforms, which will change the way all businesses, including the self-employed, account and pay tax. This is intended to simplify the tax process, both for taxpayers and HMRC. The self-assessment process will be replaced by more frequent, digital updates that will report directly to HMRC through compatible software.