Less than a year before its planned introduction, many UK businesses have little or no awareness of HMRC's Making Tax Digital initiative.
This is the finding of a new survey of 1,100 UK firms conducted by the British Chambers of Commerce (BCC) in partnership with Avalara. The study has found that a worrying 24% of firms have never even heard of Making Tax Digital (MTD) and 66% know it only by name or are aware of just a few details about it.
From April 2019, all VAT-registered businesses will have to maintain digital records for VAT and submit their returns digitally. MTD will require these firms to have MTD-compatible software in place that can create a VAT return and connect to HMRC systems via an Application Programming Interface (API).
These changes will affect some 2.6 million UK businesses. However, even among those that are aware of the changes ahead, 25% have made no preparations at all.
Businesses are also reporting low levels of support from HMRC. Asked to rate the overall level of service, help and support received from HMRC on a scale of one to five, 60% of firms gave the tax authority a rating of three or less.
Levels of direct engagement with HMRC remain low. Of those firms that are aware of MTD, just 6% of businesses have contacted HMRC for advice, compared to 51% who have spoken to an accountant.
Now the BCC is calling for the introduction of Making Tax Digital to be delayed for all businesses until the start of the 2020/21 financial year.
Mike Spicer, BCC direcctor of economics and research, said: "The Government's aim to modernise the UK's tax system is admirable, but in view of low business awareness and the impending challenges of Brexit, it would make sense for HMRC to delay the implementation of Making Tax Digital in order to get this change right.
"We are concerned that far too many firms still aren't clear on what Making Tax Digital is, or what it means for their operations. With just months to go before the deadline, these knowledge gaps could make the timeline for change unworkable for many firms."
Richard Asquith, vp of global indirect tax at Avalara, said: "Making Tax Digital … is the biggest overhaul in VAT obligations in decades. Approximately 25% of businesses are still using manual or spreadsheet record keeping, which falls foul of HRMC's new requirements. It is still not clear how they can become compliant without more education plus investment in compliance accounting packages."