In June 2020, HMRC announced that by April 2022, all VAT-registered businesses will have to submit their returns using MTD-compliant software. Now the deadline is fast approaching, SME owners are looking for support to make the transition as smoothly as possible.
Making Tax Digital (MTD) is HMRC’s drive to become the most digitally advanced tax agency in the world, and businesses have been encouraged to sign up for MTD for VAT before it becomes mandatory in the spring.
In preparation, SMEs have been persuaded to use the relevant software to keep digital records, submit quarterly income, expenses and a yearly statement and submit via an API link. For many businesses, the benefits to MTD are clear, and offer an opportunity for SMEs to work more collaboratively, however some business owners remain apprehensive.
Riaz Kala, Associate Director at Haines Watts Manchester has outlined the positive changes that MTD will offer SMEs.
Riaz explains: “Becoming MTD compliant is an opportunity for SMEs, as the benefits of adopting technology greatly outweigh the cost to implement it. Through the use of technology businesses will save time collating documents and increase the overall efficiency of data processing.”
“Through improving the overall efficiency, data accuracy will in turn improve allowing businesses access to information from anywhere, in real time. With a system that emphasizes automation, human errors are decreased tenfold.
“The easy to use technology will mean that businesses will have the opportunity to work together, on all levels, allowing SMEs to work collectively and streamline their financial management processes.”
The new VAT penalty regime has also been praised as being beneficial for businesses, with penalties for late submission and late filing separated.
Riaz added: “The new regime will be far less demanding on businesses as the cap for late submission penalties lies at £200, allowing 15 days interest free payment. After this, there will be a 2% charge for up to 30 days and 4% thereafter.”
Although the use of new technology to scrutinise accounting data may seem daunting, there is no doubt that it will be beneficial, encouraging and allowing SMEs to work cooperatively.
