- Companies recognize the benefits of MTD, but do not have the time or money to implement it.
- Data is the biggest barrier right now and quarterly reporting could accentuate that.
- Accounting software can be combined with other business tools to achieve profitability
With HMRC’s Making Tax Digital (MTD) rules set to be applied more widely this month, new research from Wouters Klower says the challenge is no longer understanding what is required of businesses, but executing MTD at scale.
Data indicates that between 50% and 69% of income tax clients have not even digitized their books yet, and there have been no signs of improvement as we approach the deadline.
Since MTD requires quarterly reporting, Wouters Klower is concerned that the first filings will expose some serious weaknesses in the technology stacks and data quality of many SMEs.
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Many companies are not yet ready for MTD
Although the level of preparedness is low, confidence in MTD’s objectives is quite high: 69% agree that it will benefit their business and 56% even see positive impacts on their customers.
“The challenge is no longer whether companies understand what is coming, but whether they can execute at scale, particularly when so many income tax clients are still not digitally enabled,” explained Associate Director of Product Management Mohammed Sidat.
At the moment, the key challenge is of course the foundation: data quality and reconciliation (47%). Customer onboarding and migration (44%), customer communication (43%), and software integration (43%) are also high on the list.
Wouters Klower also points out generational differences: the youngest clients, under 45 years old, are considered to be the most prepared. On the other hand, 47% of those surveyed continue to prefer paper.
Looking ahead to the new era of BAT mandates, the report suggests that there are clear business opportunities for the financial and software sectors. Compliance and accounting software packages, workflow automation, and digital migration/onboarding are services that could see greater demand with the shift.
As for those affected by MTD, the report reminds business owners to remember the time savings, accounting efficiency and forecasting benefits that come with MTD, highlighting its long-term advantages. With 45% also concerned about costs, businesses are reminded that combining MTD software with other essential business tools could be more effective than they thought.
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