Making Tax Digital pilot suffering from ‘low take-up’

New and improved awareness levels of the government’s digital tax accounts are failing to translate into much adoption of the pilot scheme.

Despite being open to 500,000 business since its launch in October, the MTD pilot has so far attracted only about 16,500 businesses, even though 1million will be affected by April.

Around eight in 10 firms seem to know this, or more specifically, 83% of firms are aware of Making Tax Digital and have started some form of preparation, HMRC has found in a poll.

Reflecting on awareness of MTD seeming much stronger than a ‘40 % unaware’ finding (issued in November 2018 -- around the same time which HMRC did its polling), the Revenue said:

“Once aware, the proportion willing to take action is high.

“The most common actions taken among those aware of MTD or the concept were discussing the changes with an accountant and starting to keep digital records.”

Yet the HMRC findings, released this month and based on polls it commissioned in last year’s fourth quarter, suggest signing-up is often seen as a bridge too far

In particular, among income tax businesses -- so non-VAT registered businesses able to join MTD on a voluntary basis, 15% said they had plans to; 28% did not know when they planned to and 30% were leaving it up to their accountants.

“We’ll have written to every business required to join this year by the end of February [2019],” MTD for Business’ Programme director Theresa Middleton said last week.

“Back in December over 80% of them were aware of the changes they need to make and…more than 16,500 businesses have already signed up to do their VAT digitally.”

The latter ‘sign-up’ figure means that out of the half a million businesses which HMRC invited in October 2018 to join the MTD VAT pilot, only about three per cent have done so.

Anita Monteith, tax manager at the Institute of Chartered Accountants in England and Wales told the Sunday Times that, if she were HMRC, she would be “concerned” by the pilot’s “low take-up.”

Speaking about MTD last week, the Revenue warned: “[We have] been clear that during the first year of mandation…[we] will take a light touch approach to digital record keeping and filing penalties where businesses are doing their best to comply with the law. But this does not mean a blanket ‘no penalties promise’.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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