FreeAgent warns small businesses against digital tax complacency
Innovative cloud accounting software provider FreeAgent has urged small businesses to make complying with the UK’s new digital VAT legislation their top priority - and not view HMRC’s leniency on penalties as a prolonged stay of execution.
The company, which makes cloud accounting software for small businesses, freelancers and accountants, believes that many business owners are putting off submitting their tax returns via Making Tax Digital (MTD) for VAT for as long as they possibly can, either because they don’t understand the new system or they are afraid of making the switch.
HMRC has announced that it will take a lenient stance on penalties for VAT filing infractions under the new system, following the revelation that around 120,000 UK businesses still have not yet complied with MTD for VAT. The authority believes that many of these businesses may be more focused on preparing for a potential no-deal Brexit, so it has decided to waive any fines for non-compliance.
However, despite welcoming the amnesty, FreeAgent has warned that this is unlikely to be an indefinite policy stance - and has urged small business owners to make getting MTD-ready their top priority, or else risk incurring penalties in the future.
Ed Molyneux, CEO and co-founder of FreeAgent, said: “With so many businesses still yet to actually sign up and comply with MTD - either due to anxiety over the legislation or because they are more preoccupied with the threat of a no-deal Brexit - the news that HMRC will not issue them with fines will be a massive relief.
“However, this doesn’t mean that digital tax has been delayed or the legislation is in jeopardy, so they should treat this amnesty with extreme caution. It’s unlikely that HMRC will keep waiving fines indefinitely, which means business owners simply won’t be able to keep putting off getting themselves MTD-ready for long.
“Sooner or later, we will see significant penalties introduced for non-compliance and these could have a hugely detrimental impact on small businesses. Therefore, the only way to guarantee avoiding these fines is by registering for MTD for VAT now and having suitable HMRC-compatible software in place to submit digital returns over the coming months.
“It simply isn’t an option to keep your head in the sand about digital tax any longer.”