New research from FreeAgent, provider of cloud accounting software to small business owners and accountants, has revealed that less than 15% (14.6%) of accountants and bookkeepers are confident that they understand everything about the next stage of Making Tax Digital (MTD) and its impact on tax.
FreeAgent surveyed accountants and bookkeepers based in the UK and found that, shockingly, over a tenth (11.8%) either ‘don’t know anything’ or ‘hardly understand anything’ about the next stage of MTD and its impact on tax. However, an overwhelming majority (97.2%) believe that their clients need to have an understanding of the legislation.
HMRC introduced the first stage of MTD in April 2019. Currently VAT-registered businesses making VATable sales above the VAT threshold of £85,000 a year are required to keep digital records and submit their VAT returns digitally as part of MTD rules. The next stage of this roll out, which is due to come into effect in April 2022, will require all VAT-registered businesses to follow Making Tax Digital rules. In April 2023, sole traders and landlords with annual business or property income above £10,000 will also be required to do the same, as income tax comes under MTD.
HMRC says that Making Tax Digital is part of the UK government’s plans to make it easier, more efficient and effective for individuals and businesses to get their tax right and keep on top of their affairs.
Despite this, nearly half (44.8%) of the respondents believe that changes resulting from MTD over the coming years will mean it will take longer to complete compliance work for clients compared to a fifth (20.3%) who believe that it will take less time.
An overwhelming majority (73.6%) believe MTD will result in accountants and bookkeepers having to help clients make quarterly or monthly tax updates to HMRC – but also still need to prepare and file an annual tax return for them. In contrast, 12.5% of respondents said they still do not know what impact MTD is going to have on the Self Assessment filing season for accountants and bookkeepers.
Ed Molyneux, co-founder and CEO at FreeAgent said, “Although MTD is the biggest change in tax for a generation, it’s clear from our research that there is still a lot of uncertainty and confusion about the legislation. Even among accountants and bookkeepers – who will be on the front line when it comes to providing help and information about MTD to their small business clients – there are still many who feel that they hardly know anything about it.
“Evidently, there is still a lot to be done to help businesses and their advisors adapt to these changes. Not only does the government need to make sure that people have access to all of the necessary information and tools they need to comply with MTD, but small business owners and their accountants must ensure they are proactively researching and understanding the legislation too.
“With future waves of MTD coming into effect over the coming years it is vital that businesses are properly informed about how the changes will impact them and know how to manage the transition as easily as possible. I would urge everyone to start doing this as soon as possible if they want to avoid unnecessary pain and confusion in the future.”