United Kingdom: HMRC Releases Survey for VAT Registration in Making Tax Digital preparedness
Companies reported having registered for Making Tax Digital, a tiny but statistically insignificant rise from 30% in a wave. But, when presented with a definition of Making Tax Digital and asked to specify whether they have linked their record-keeping software with HMRC, this reduced to 26%, indicating confusion among firms regarding the criteria of complete compliance with Making Tax Digital.
However, in wave 2, more than a quarter of the firms (28%) who were aware of Making Tax Digital said that the criteria of Making Tax Digital did not extend to their company (before being prompted with a definition of Making Tax Digital). For instance, a quarter of firms’ knowledge of Making Tax Digital did not instantly transfer into a grasp of how it applied to their business.
Understanding of Making Tax Digital
While the idea of Making Tax Digital was well-known, the unprompted grasp of particular Making Tax Digital criteria was lower. HMRC asked firms in wave 1 what they expected they would need to do when Making Tax Digital goes into effect. Just 27% of those polled could recall at least 3 specific conditions.
Recollection of specific requirements:
- 15% VAT returns to submit through Making Tax Digital
- 14% requirements to keep digital records
- 1% of businesses recalled the mandated date.
This question in phase two was different, asking businesses what they thought were the most important criteria of Making Tax Digital in general, rather than how it affects their firm. The goal of this revised language was to capture a more accurate picture of businesses’ overall concept of Making Tax Digital.
Recollections of the three criteria of Making Tax Digital:
- 25% obligation to submit VAT returns using Making Tax Digital-compliant software
- 4% digital record for requirements
- 7% of firms remembered their deadline.
HMRC’s Result
The findings of the two waves reveal that overall knowledge of Making Tax Digital is significant among companies with a turnover below the VAT threshold. However, the statistics show that as of January 2022, firms in this demographic were still not entirely complying with the Making Tax Digital criteria. This was demonstrated by a lack of understanding of the precise needs and a large number of respondents who had yet to take action to prepare to satisfy these objectives throughout the waves.
Source: gov.uk
