Many building and timber merchants are likely to be unprepared for the imminent introduction of the Government’s new ‘Making Tax Digital’ initiative for VAT returns, warns business management software specialist ECI.
April 1 marks the deadline for UK businesses to meet the second phase of the government’s new initiative for VAT returns, ‘Making Tax Digital’ (MTD).
From this date, merchants operating above the £85,000 VAT threshold will need to ensure there is a digital link in place between where they store their data and where it is submitted to HMRC from. For businesses that don’t, they could face being hit with significant penalties.
But if history is anything to go by, many small businesses are likely to be unprepared for the change. In August 2019 following the introduction of the first phase of MTD, HMRC had to send more than 100,000 warning letters to businesses that hadn’t complied with the new digital taxation regulation.
Speaking about the updates to MTD, Chris Fisher, UK Operations Director, LBMH at ECI says: “In the long term, MTD will make VAT returns much easier for UK businesses – but like with any change in legislation, the transition can often be difficult. That’s why we’ve added the MTD platform to Spruce to make it as easy as possible for our customers to adapt to the change.
“There will be no more, ‘where did I save that spreadsheet’, customised VAT reports or manual calculations scribbled down on a rough piece of paper. All business records will be able to run through the software, it will then create a VAT return for them, saving time and money.”
MTD was initially announced in 2015. The initiative has been introduced due to incorrect tax returns costing the exchequer millions of pounds in unpaid VAT. In 2017-18 alone, there was an estimated £9.9 billion shortfall and it was put down to largely avoidable mistakes.
The process of the UK going digital for VAT returns came into effect in April 2019. But up until April 1 2020, HMRC still accepts businesses cutting and pasting data from their accounting and finance software into a programme that allows them to digitally send HMRC a VAT return. Yet time is quickly running out for those businesses that are right clicking.
Chris adds: “With weeks to go until the deadline, it’s important building and timber merchants act if they haven’t already. If you’re unsure about what you need to do, you should seek specialist advice from your ERP or business software management provider.”
For more information on ECI, visit www.ecisolutions.com/uk.
