New figures from HMRC have revealed that three quarters of VAT-registered financial firms have yet to sign up for Making Tax Digital (MTD) and risk missing the deadline to do so.
MTD is the Government's ambitious plan to transform the way taxpayers interact with HMRC. With only a few exemptions, VAT-registered businesses trading over the VAT threshold of £85,000 are required to keep records in a digital format, ensure that the transfer or exchange of VAT information is digitally linked and submit their VAT return information to HMRC using MTD compatible software.
HMRC estimates that 1.2 million businesses are subject to the MTD rules, which became law for VAT periods starting on or after 1 April 2019 (or 1 October 2019 for organisations which are deemed to be more complex). Depending on their VAT return stagger, a significant number of these will be required to submit their first quarterly VAT return to HMRC using software by the 7 August this year.
Yet figures just released by HMRC show that the financial sector has been one of the slowest to sign up, with 75 per cent of firms yet to register.
Commenting on the new figures, John Forth, the head of RSM's financial services indirect tax practice said: 'While it's not clear why financial firms have been so slow to sign up, these figures are pretty shocking.
'It is possible that HMRC have overestimated the size of the problem due to the complexity of the VAT regime. Alternatively, they may have failed to recognise that many financial services organisations will be regarded as complex and will therefore be subject to the 1 October deadline. As a result, we may see this figure come down rapidly over the next few months.
'While HMRC has stated that they won't issue filing or record keeping penalties during the first year, financial firms should not see this as a reason not to register. MTD represents a major change to the way businesses report and pay their VAT, and businesses need to make sure they are ready.
'Currently, HMRC are dealing with 10,000 registrations every day. Clearly there are tens of thousands of VAT-registered financial businesses that need to get their skates on and register at the earliest opportunity.'