Ahead of the introduction of Making Tax Digital (MTD) for VAT on 1 April Androulla Soteri, tax director at MHA MacIntyre Hudson, says MTD could be far too costly for small businesses and the only consolation is that the deadline is further away than you think. 

“Originally, when MTD was to be introduced for income tax reporting purposes first, it was sold as a way to save businesses money. HMRC no longer sings from this song sheet and it’s just as well, because MTD won’t cut costs. Every client we have will incur a physical or notional cost (in terms of lost time) in transferring to the new system. 

“If MTD applied only to large enterprises this might not matter, but the threshold is a turnover of £85,000. As some software houses are charging up to £700 for the relevant software upgrade, and £200 a month thereafter, MTD is a considerable expense with no upside for many small businesses.  

“HMRC has failed to provide effective support and guidance in crucial respects. HMRC’s website is not user friendly. While it includes details of the different software packages and providers, it does nothing to guide businesses towards the solution that is best for them. Some may have paid too much for their software as a result.  

“Fortunately, 1 April is not the end of the road, although many mistakenly think it is. You actually should wait for the current VAT quarter to end before registering, unless you want to join the pilot scheme. So a business joining for the June 2019 VAT return, the first quarterly VAT return affected, should only register from around the 15 May if they pay by direct debit, or 8 May if they pay manually.”