Eight in 10 voluntarily VAT-registered businesses “unaware” of MTD for VAT extension

Eight in 10 VAT-registered businesses that are not yet using Making Tax Digital (MTD) for VAT do not know about the wider rollout of the regime this April, a major study has revealed.

The research, published by cloud accounting software provider QuickBooks, shows that the vast majority of small businesses are unprepared for the transition to digital tax.

The report comes ahead of the introduction of the extension of MTD for VAT on 1 April 2022.

Under the current regime, VAT-registered businesses with an annual turnover above the VAT threshold (currently £85,000) must file quarterly digital VAT returns using MTD-compliant software, such as QuickBooks, Xero, or Sage.

But from April 2022, the scheme will be extended to all VAT-registered businesses, regardless of how much they earn.

However, the QuickBooks survey suggests that huge numbers of small businesses are not ready to transition to the cloud.

According to the study, more than four in five (82 per cent) eligible firms yet to comply are “unaware of the impending deadline”, while less than a third (29 per cent) know what they need to do to become MTD compliant.

The proportion of businesses that have “no idea” what to do, meanwhile, has increased from eight per cent in November 2021 to 16 per cent in March 2022.

When asked why they feel unprepared for MTD for VAT, a third (32 per cent) of businesses said they didn’t have the time, while a similar proportion (30 per cent) said they were not comfortable with the technology involved.

Not knowing what MTD is (29 per cent), needing to talk to an expert first (28 per cent), and being scared to make errors (26 per cent) also topped the list of key challenges.

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