Question to the HM Treasury:

To ask the Chancellor of the Exchequer, with reference to his objective to make tax digital for VAT, what latest estimate he has made of the numbers of VAT-registered businesses with taxable turnover below £85,000 who are (a) already managing their records and making their returns using compliant software, (b) equipped to manage their records and make their returns using compliant software but not yet doing so, and (c) not yet equipped to manage their records and make their returns using compliant software.

HMRC research shows that 97 per cent of small businesses and landlords within the scope of Making Tax Digital (MTD) have access to a compatible device on which to operate it. For MTD for Income Tax, HMRC research shows that 52 per cent of businesses in scope incorporate spreadsheets and 22 per cent incorporate software into their recordkeeping practices. In September 2021, the Government announced businesses would have an extra year to prepare for MTD for Income Tax. Free software will be available for the smallest businesses with straightforward affairs.

Over a third of VAT registered businesses with taxable turnover below £85,000 have already voluntarily chosen to join MTD for VAT, demonstrating that a modern and digital approach to managing tax can work for businesses of every size. HMRC research shows that around 80 per cent of VAT-registered businesses below the VAT threshold already employ a digital record-keeping system. Online submissions for VAT returns have been mandatory for all VAT-registered businesses since 2010.