Just 4% of small businesses join Making Tax Digital

The April 1st deadline for small businesses to sign up to the Making Tax Digital (MTD) for VAT scheme has passed by with a whimper rather than a bang.

It also appears to have slipped past many of the UK’s small companies that should –technically at least – have registered for HMRC’s new regime. Just 4% of the country’s businesses mandated to join MTD have signed up for it!!

Only 2% of accounting firms have registered clients for MTD, from an estimated 72,000 tax UK agents. These pieces of information came to light after a freedom of information request by cash flow service Float. Float, and many other observers, say the MTD process is confusing and that HMRC has much more to do to inform people about the change in the law.

Anita Monteith, of the Institute of Chartered Accountants of England and Wales, says: “The agents services account was not fit for purpose until relatively recently and that’s why agents couldn’t sign up.” Theresa Middleton, director of the MTD programme, says: “You don’t necessarily need to sign up from day one, but you do need to make sure you’re keeping your records digitally for your next VAT period which starts on or after April 1.”

Here are some of the latest MTD statistics following Float’s request…

  • 55,250 businesses have registered for MTD out of 1.2m.

  • 13,427 businesses were signed-up by agents, meaning the majority of businesses signed up themselves.

  • 88 per cent of VAT registered business with a turnover above the VAT threshold use an external agent to manage their tax affairs.

  • 1,679 agents have signed up clients to MTD. HMRC estimates there are 72,000 agents acting for clients in the UK.

HMRC believes about 4,000 businesses a day are signing up to MTD. This may seem like a lot, but it still leaves big shortfalls of registrations by the time the first quarterly VAT returns are due for submission in August.

Colin Hewitt, Float CEO, says: “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. 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. 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".

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