More than a million businesses have yet to register for the British government's new digital tax programme, with less than a week before the reform kicks in.
Making Tax Digital (MTD), first announced by UK tax collector HMRC in 2015, will require companies to keep digital records and file quarterly reports with the taxman. It is rolling out the first phase of the programme, MTD for VAT, on 1 April.
However, a Freedom of Information (FoI) request has revealed that, as of Monday 18 March, just 55,520 businesses were registered with the scheme. HMRC has estimated that there are some 1.2 million VAT-registered firms that will need to comply.
The first digital quarterly returns are due to be submitted by 7 August, so there is still some time for firms to get their asses into gear – but the current rate of registration would need to dramatically increase.
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At the moment, HMRC estimates 3,000 registrations a day, which would take the total number of registered companies to just over 400,000 by the August deadline.
The FoI results echo concerns expressed by the Federation of Small Businesses, which earlier this month warned that half of its members didn't have the software they needed to comply.
The latest probe was carried out by Float, a cashflow forecasting software company that requested the FoIs. CEO and co-founder Colin Hewitt said many firms will be "busy running their businesses" and will rely on accountants to communicate with them.
"Sadly many accountancy firms are still very much reactive rather than proactive, and won't have done more than sending a few emails which will probably be sitting buried in inboxes across the country," he said.
The FoI also asked about the number of businesses that had been signed up by agents, finding that this had been the case for just 13,427 registrations.
At the same time as it sent the FOI response back to Float, HMRC issued its own statement on preparedness for MTD, which claimed that more than 70,000 business had signed up to the new service. This is in line with its estimate that 3,000 firms are registering each day.
"Many businesses are using MTD as an opportunity to finally move from legacy software or spreadsheets to a fully fledged cloud accounting solution, and this can take time," said Hewitt.
He added that he was "confident that HMRC will show leniency with businesses who are late to register", and called on the taxman to "step up communications on what is required".
Indeed, HMRC has come under fire for failing to contact companies about the changes – parliamentarians criticised the fact that 40 per cent hadn't heard about the rollout as recently as last November.
The taxman has countered such criticisms by pointing to research in December that said more than 80 per cent of firms aware of MTD, and of those who were aware, 83 per cent had started making preparations. It later claimed that it had written to every business by the end of February.
But the programme's director, Theresa Middleton, did acknowledge other firms needed to take action, urging all those affected "to start preparing now" and pointing to the 220-plus software products available to users. ®