For the benefit of those that have been living under a rock for the past few months, the government is introducing a new system called making tax digital (MTD). The main change this will bring about is that most companies over the VAT threshold will have to keep their records digitally and use MTD-compatible software to file their returns. And whilst this was promised to make things easier for both HMRC and companies alike, the take up has been astonishingly slow. Given the deadline is April 1, either there will be a huge rush as businesses aim to comply – or many will miss the specified date. So far, according to HMRC, 70,000 businesses have made the necessary accommodations. However, the figure that should now be converted is around 1.2m, so it’s evident there’s a long way to go. Given the widespread coverage through news media and advertising, it would be difficult for anyone to argue they weren’t aware. Furthermore, only two per cent (or 1,679) accountancy firms have signed up any of their clients for MTD. Needless to say, Finnies is one of those. This is in stark contrast to research conducted by HMRC, only a few months ago in December, which suggested 83% of businesses had begun to start the process and make the necessary changes. The failure to convert businesses, despite legislation lies primarily between a complicated sign up process and lackluster practices. Many accountants a simply reactive rather than proactive; they may have sent some emails to their clients but stopped short of offering a thorough understanding and details breakdown of the process. So what will happen for those who don’t comply? Well, it’s unlikely that we’ll see a slew of missed deadline fines. What’s more likely is that there will be leniency offered in the hope that goodwill will be reciprocated in the form of swifter sign ups. Indeed, HMRC themselves confirmed that April 1 shouldn’t be considered a cliff-edge and companies will require time to become familiar with the changes. The first returns for most businesses under the new system won’t be due until August at the earliest. Filing or record keeping fines will not be issued where businesses are showing willing to conform. However, this leniency will not last forever and business should not consider it as additional time to spend on other projects. Those who have not signed up should be making preparations immediately. They can do this by reviewing their VAT processes, methods and software. And for those relying on an accountant to manage their processes, if you haven’t been made aware; this should be a major warning sign. If you’re worried about the move to MTD, how to comply and how it will effect you, one of our professionals will be more than happy to help.