Businesses not ready for Making Tax Digital for VAT, says ICAEW

Posted in Sarah Jenkins | Posted on 4 Dec, 2018

Making Tax Digital (MTD) for VAT “should not be mandatory”, the Institute of Chartered Accountants in England and Wales (ICAEW) has warned.

The report comes ahead of the introduction of the Government’s all-new digital tax system, which comes into effect in April next year.

Under Making Tax Digital, all businesses which earn over the VAT threshold (currently £85,000) will be required, by law, to file and report their VAT returns online, using specialist software each quarter.

However, the accounting regulator has today warned that the system should not be made mandatory in 2019, and instead should be taken up by businesses only who feel it is best for themselves.

It comes after new research revealed that some 40 per cent of businesses about to be affected by MTD are “not yet aware of it” and a quarter of all business are “still using a paper-based accounting system”, and thus not prepared for such a drastic change.

Commenting on the introduction of MTD, the regulator said: “We support HMRC’s ambition to increase the use of digital technology, but we are concerned, as is the committee, that many VAT registered businesses are not going to be ready for implementation in April 2019. Direct communication by HMRC about this major change is only just beginning and with only four months to go, there is not enough time for businesses to act.”

It added that “MTD for VAT is a major change in tax administration” and “with its start date coinciding with Brexit”, it is important that businesses are not overwhelmed.

As one of the leading accounting bodies in the UK, the ICAEW’s words may carry heavy weight with the Government. However, with significant investment in the new system, HMRC is likely to continue with its timeline.

Sarah Jenkins, General Practice Partner at Milsted Langdon, said: “It is unfortunate that the timing coincides with Brexit, but as a firm we have been getting in touch with our clients to make them aware of how MTD will affect them and how we can help.

“We’ve worked closely with many of our clients and successfully moved them to cloud accounting, where they are seeing the benefits already and will be better prepared for MTD.

“Our Business Intelligence team provides innovative solutions for our clients, and increasingly these are related to supporting the implementation of MTD.”

See how our Business Intelligence team can help you get the most from your accounting software and get prepared for Making Tax Digital for VAT. Contact Sarah Jenkins today at or by calling 0117 945 2500.