Making Tax Digital for VAT: The Good and the Bad
HMRC recently commissioned a qualitative study into the ongoing effects of Making Tax Digital for VAT (MTD VAT). This study was focused on small companies (30 employees or less with an annual turnover under £10m) and consisted of 60 in-depth interviews with the employees tasked with fulfilling the VAT obligations of the company.
This research concluded that experiences of positives and negatives in regards to MTD VAT varied greatly depending on the specific financial requirements of the business in question and their adaptability to change.
While businesses using bridging software typically saw minimal benefits, those who chose to purchase fully compatible software seemingly found that the ongoing benefits outweighed the costs.
The benefits these companies reported include; more efficiency, greater confidence in their VAT and finances, greater control over their returns and less error, allowing for a less stressful experience than in previous years.
It does seem that many of the businesses who found greater benefit in using fully compatible software tended to be those who were more adaptable to change such as start-ups and businesses early enough in their life cycle to implement such changes without huge issues while individuals with a neutral opinion on the benefits of MTD VAT tended to be familiar with accounting software already and had only experienced minor differences.
Those who reported that they found that the costs of MTD VAT outweighed the benefits usually had simple financial requirements which they felt had been easier to deal with previously.