The HMRC portal is closed: how to support the SMBs that missed the MTD VAT deadline

There’s a lot on the minds of small business owners. In the current economic climate, these priorities are in constant competition. So it’s no surprise that a recent survey by Intuit QuickBooks found that small businesses are more likely to prioritise tackling rising costs, chasing late payments, and hiring new staff than becoming compliant with new Making Tax Digital (MTD) rules.

But there are risks to putting compliance on the backburner. Now that the MTD VAT reporting portal has closed, those businesses that missed the cut-off risk fines from 1st January 2023 – more unwelcome than usual against the backdrop of a recession. 

Compliance and understanding

When the changes to the MTD VAT reporting protocol were announced in 2021, SMBs around the country felt they had plenty of time to familiarise themselves with the new platform requirements and get compliant. 

However, after a barrage of unexpected events causing many challenges for these business owners in recent years – from the pandemic to rising inflation – the reality is that many were not able to become compliant in time and have now missed the deadline. 

In a survey of 1,000 VAT-registered small business owners, two in three recognised the new MTD VAT initiative as a cost-saving measure. Yet, a lack of understanding around the change means that less than half are aware that MTD-compatible software is required for compliance with MTD. 

But if many business owners don’t even know what technology they need, how can they achieve compliance?

There is an opportunity now for accountants to support small businesses in many more ways than just their numbers. The right accountant should help them to grow their businesses through enhanced cashflow management, faster payments and utilising advancing technology; helping them become informed and compliant with MTD so that they can reap the benefits. 

Bridging the understanding gap

For some, the deadline date may have come and gone without even knowing; others may have dreaded its arrival knowing they were not ready. Others, however, saw the date coming and felt in control – they believed their businesses were ready and compliant with MTD when they entered their VAT returns onto the HMRC website via the portal, when in reality they were not. 

Now, for all businesses that failed to properly achieve MTD compliance, getting their taxes back on track must move to the top of the priority list. 

Accountants can lead the way in resolving the discrepancy between understanding and protocol when it comes to tax legislations. This lack of understanding is a major obstacle to small businesses – and the expertise of accountants will prove crucial in getting these SMBs back up to speed.

The first key step is making sure small businesses fully understand MTD VAT. It is not just a change of process, but a shift in platform requiring MTD-compatible software and the keeping of digital records. With real-time concerns such as tackling late payments and hiring staff taking up the vast majority of SMB owners’ day to day, many will feel they do not have the time to navigate these new procedures. 

With the support of their accountants – and financial management software providers – SMBs can learn not just how to use the new software, but how it will boost efficiency and productivity. Half of SMB owners we surveyed said that MTD VAT saves their company time and resources compared to traditional VAT returns – but it’s understandable why those who have not yet complied wouldn’t be aware of these benefits.

The long-term picture

While upskilling in new tax procedures may feel like a burden to already overladen SMBs right now, this transition to MTD compatible software can provide many long-term benefits for the businesses. In fact, of those who are already compliant, the main reason for signing up was because they knew it was the right thing for their business (34%) – showcasing how important it is that small businesses understand how MTD can benefit them.  

But the software required to make MTD VAT a reality is not a one-trick pony. From automated forecasting, to real-time insights into financial performance and streamlined payroll, using the right tools could become a key driver of growth for SMBs far beyond their tax returns. 

Digital technologies have the power to reinvent and revolutionise the running of small businesses. This is why it is so important that accountants help to bridge the understanding gap; to guide business owners to the correct information and to software providers that can help them create more efficient and productive practices. 

In summary

The economic climate of the country has faced an unstable few years – with so many dips, dives and surges, small business owners are left constantly in reactive mode. While in this response-based mindset, forward-thinking items like compliance with changing tax regulations has gone completely unnoticed for many – with less than half even aware that all VAT-registered businesses are required to follow MTD legislation, or of the correct timeline for compliance. 

Accountants and financial management software providers have the skillset required to resolve these critical issues, and now more than ever, these expert resources should be embedded into the day to day running of SMBs. With many businesses facing the harsh reality of potential fines as we enter the new year, I hope the knowledge and guidance of accountancy experts will be embraced by all and as a result we can look forward to seeing the UK’s SMBs growing, evolving and back on the right side of compliance. 

For more information on how QuickBooks software can support accountants and their small business clients visit this page.