Figures from the Office of National Statistics state that there are 2.67 million businesses registered for VAT and/or PAYE. Any business with employees must register for PAYE, but not all of these businesses are registered for VAT. This prompts the question – how many VAT registered businesses in the UK are there?
An HMRC response to a Freedom of Information request states that an estimated 1.1 million businesses will have to sign up for Making Tax Digital for VAT (MTDfV) following the 1st April 2019. This is not the total of of VAT registered businesses, but will include the vast majority of VAT registered businesses with an annual turnover above £85,000.
An HMRC newsletter issued on 29th March 2019 states that approximately 77,000 businesses have signed up for MTDfV. Based on a total group of 1.1 million, this means that only 7% of businesses have taken action to comply with the new VAT regime.
The more surprising statistic revealed is that of the estimated 72,000 tax agents in the UK only 2% have signed up any clients to MTDfV. This suggests that either 98% of agents do not have MTDfV clients (unlikely) or that the majority of agents are waiting for their clients to make the first move.
All businesses affected by MTDfV have to either sign themselves up or have an agent sign them up on their behalf. This is not automatic and HMRC are not signing businesses up.
Alterledger has signed up all existing clients to MTDfV who need to submit returns under the new regime. All of these clients were already using cloud accounting software so the process has been relatively straightforward. If you are not currently using cloud software the costs of upgrading to MTDfV could be as much as £2,600 according to a House of Lords report.
The first batch of VAT registered businesses who are affected by MTDfV will need to file their first return under the new regime by 7th August 2019. If your turnover is over £85,000 you will need to act now to prevent any problems with filing your first VAT return starting after 31st March 2019.
After you are obliged to join MTDfV, the submission of information to HMRC must always be via an Application Programming Interface (API). HMRC expects most businesses to use API-enabled commercial software packages both to keep digital records and file their VAT Returns. Xero is an approved software package. Alternatives to software include Bridging Software and API-enabled spreadsheets. Bridging Software and API-enabled spreadsheets introduce an extra layer of administration that would be unhelpful for many businesses.
Alterledger Limited is licensed by the Chartered Institute of Management Accountants and registered with the Information Commissioners Office.
© 2020 Alterledger Limited
Website by Haiwyre