Hundreds of businesses and sole traders in Cumbria could be in for a shock as they begin accruing penalties for failing to comply with Making Tax Digital for VAT, according to a Cumbrian accountant firm.
Since the beginning of April, VAT registered businesses with a taxable, annual turnover below £85,000 must now comply with HM Revenue & Customs’ (HMRC) flagship digital tax system and new electronic filing requirements. Mandatory compliance has been in place for businesses above the VAT turnover threshold since April 1, 2021.
According to HMRC, only around a third of VAT-registered businesses with taxable turnover below the threshold have voluntarily signed up to MTD for VAT ahead of the deadline.
Despite many reminders and warnings in recent months, there is a concern that many of the region’s smallest businesses still aren’t ready for the new requirements of Making Tax Digital (MTD).
This requires businesses to record and report their VAT affairs digitally each quarter using one of two methods – a bridging tool or HMRC-recognised and fully compatible MTD software solutions.
The bridging tool works by connecting non-MTD compatible software, such as Excel spreadsheets, to HMRC’s systems. Although compliant and more cost-effective than many of the popular cloud-based accounting solutions, a bridging tool solution could result in a greater workload for many business owners.
Graham Lamont, Chief Executive at Lamont Pridmore, said: “We appreciate that many small businesses are already having to make difficult decisions about spending and investment, but if they don’t comply with the new MTD rules they could face serious penalties down the line.
“While the latest cloud accounting solutions may seem more expensive, in the long run, they can provide incredible insights and automation that eventually help many businesses to save money and spot risk, as well as new opportunities.”
Graham added that HMRC had made it clear that it expected every business to make “every effort to comply” with the new rules and he is concerned that significant penalties may lay ahead for those who do not act now.
Chris Lamont, a partner at Lamont Pridmore, added: “We have already helped hundreds of other businesses implement compliant systems within their operations, which has not only made the new recording and reporting requirements easier but also automated many day-to-day financial functions.
“What’s more, our clients now have a far clearer picture of their businesses’ financial health in real-time, which has proved invaluable to many during the decision-making process.
