In a letter last week to the Financial Secretary to the Treasury, the Institute sets out the case for introducing a soft landing when Making Tax Digital (“MTD”) for VAT is extended later this week from 1 April 2022 to all VAT registered businesses including the smallest businesses in the UK. The letter also sets out the Institute’s position on basis period reform and tax complexity.
At a recent MTD Advisory Forum meeting, the Institute was advised that a soft landing will not be available to businesses mandated to use MTD for VAT from April 2022. This was on the basis that “over 30 percent of these businesses are already voluntarily using MTD for VAT and have not faced difficulties in meeting their VAT obligations”. In addition, HMRC explained that “relatively few businesses with taxable turnover below £85,000 are likely to be using multiple software products to keep their business records and that the minority that do use multiple products will have received sufficient notice of the new rules”.
However, this does not take into consideration the many small businesses who are currently not using software of any type for whom the requirement to use software and keep digital VAT records is a significant step change. Many businesses are also unaware of the forthcoming changes as they are unrepresented and, to date, there has not been a public education campaign on this forthcoming change.
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