82% of VAT registered businesses are still unaware of the commencement of the April MTD deadline

If you’re a VAT registered business, you’re probably well aware of Making Tax Digital (MTD) — the government initiative to digitise all tax and finance reporting in a way that improves accuracy and speed. And with the deadline fast approaching for all businesses to switch to MTD compliant processes for VAT returns, you’d think that all companies are prepared for a smooth transition. But, this couldn’t be further from the truth.

In fact, a massive 82% of small businesses are still unaware that they need to be MTD ready from April 2022, according to research by Intuit QuickBooks. Here, we’ll go through why this is and how business owners can get on track before the deadline hits.

Small business owners aren’t confident with Making Tax Digital

As the deadline for MTD draws nearer, it’s become clear that more and more entrepreneurs aren’t entirely sure what needs to be done to be MTD compliant. Just 29% of UK business owners know how to become MTD compliant, marking less than a third of all respondents. This figure has dropped from 38% of respondents since November 2021, hinting that entrepreneurs are losing confidence as we move closer to the commencement of the MTD deadline.

Despite the deadline looming, business owners are increasingly putting off getting MTD compliant. Back in November, the number of respondents who were unsure of what needed to be done was only 8%, which doubled to 16% at the time of the study. With just a month left to go, it’s crucial that businesses prioritise becoming MTD compliant.

Why are businesses not MTD compliant?

Even though Intuit’s study found that respondents spend around 4.5 hours every month worrying about their VAT tax return, less than half (47%) are either already compliant or are confident in being compliant in advance of the deadline. For the rest of them, there’s a myriad of reasons why they may be putting off becoming MTD compliant or even learning about what needs to be done.

The study found that of those who aren’t already MTD compliant:

• 32% of businesses put off being compliant because they don’t have the time

• 30% of businesses are uncomfortable with the technology involved

• 29% of businesses don’t know what MTD actually is

• 26% of businesses are scared of making errors 

Of those that knew what MTD is, 28% said they’d prefer to speak to an expert about it before making any changes to processes, while 24% weren’t aware the deadline was so soon.

Which industries are feeling it the most?

The new rollout of Making Tax Digital which comes into effect in April 2022 affects all VAT-registered businesses, regardless of their income. This means that, regardless of the industry your business deals in, if you’re a VAT-registered business, you must start following MTD processes, or risk facing financial penalties.

While this deadline is the same across the board, our research found that some industries are dealing with the pressure differently. Businesses in the Retail, Catering and Leisure industry were the most confident about Making Tax Digital, with 41% admitting they’ll be ready by the deadline. Meanwhile, Healthcare comes up top of the list for the most compliant industry, with 25% of businesses in the industry revealing they’re already MTD ready.

The Arts & Culture industry is perhaps the most ‘in the dark’ about Making Tax Digital, with almost 20% of businesses revealing they’re unsure about what needs to be done, while a further 33% are aware but putting off starting the process.

More businesses require professional support

As previously mentioned, businesses spend, on average, 4.5 hours worrying about filing their VAT returns - a figure that could be drastically lowered if more support is offered and readily available.

This sentiment that more support is needed is echoed through the results of the study, with 39% of those questioned admitting they’d like more expert tech support.

Many businesses also revealed they’d prefer more knowledge about the process, including knowing more about the deadline (38%) and having more clarity on what is needed (37%).

Meanwhile, others simply need more time to devote to getting Making Tax Digital ready, with 36% feeling like they’re running out of time to become compliant.

How QuickBooks can help with Making Tax Digital

With only a month to go until Making Tax Digital comes into effect, it’s crucial that businesses start getting on track sooner rather than later. This means working on creating digital links if you’re not already using functional compatible accounting software, and ensuring that everything you do is compliant.

Use QuickBooks’ MTD compliance checker to make sure your business is on the right track by answering five quick questions. And if you’re part of the 37% of respondents that are looking for support from professional accountants, you can find an accredited accountant with us to give you all the information and professional support you need.

1 QuickBooks commissioned survey of 1,000 VAT-registered businesses/ small businesses (with less than 250 employees who have an annual turnover of less than £85,000) 

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