Business Services • Business Tax
Basis period reform is a significant change to the way the trading profits of sole traders, partners...
By RJP LLP on 16 May, 2024
Business Services
MTD for VAT costs more time and money than expected
By RJP LLP on 10 February 2020
Making Tax Digital was intended to simplify tax compliance for businesses, but the results show a very different picture. According to a new ATT and CIOT survey, 70% haven’t seen a reduction in accounting errors and 30% have seen errors increase. In addition to this, businesses have seen their compliance costs rise, with the average business owner spending hundreds of pounds extra on MTD for VAT compliance. 45% of respondents have spent between £109 and £500 on costs and 12% have even seen their costs soar over £5,000.
Compare this to the estimated average cost of £43 per VAT-registered business made by the government – the reality is significantly more.
The CIOT survey also found that businesses are not experiencing an increase in productivity in return. Only 14% experienced an MTD productivity boost and 51% have seen productivity drop.
The survey results indicate that MTD for VAT has not made tax easier and the change has not benefited businesses. Armed with these findings, the CIOT and ATT will be asking the government to conduct a full review of MTD before its scope is further extended.
VAT-registered businesses with a turnover above £85,000 have been submitting their VAT returns using MTD-compatible software since April 2019. Plans were in place for MTD to be extended to other taxes, but these have been postponed indefinitely.
The ATT and CIOT conducted their survey of business owners and accountants throughout December 2019 and January 2020 and based their reporting on a total of 1,091 responses.
If you have any concerns relating to MTF for VAT, please contact partners@rjp.co.uk.
