Now that the government is embracing the digital age, it seems businesses are having to adapt their long-standing approach to various aspects of their administration. In the recent past, we have had Real Time Information (RTI) for payroll. Last year we had GDPR. This year it is the turn of Making Tax Digital (MTD). After being in the pipeline for a couple of years we are now at the cliff-face, and many businesses who have not prepared for all that is entailed, along with the additional costs.
So what is it all about?
The press releases will have us believe its primary aim is to make administration more effective, efficient, and easier for taxpayers through the implementation of a fully digitalised tax system by 2020 (not too far away). As a side-line, it will also reduce HMRC’s costs in managing tax affairs.
What impact will it have?
Businesses will need to keep their records digitally and initially submit all VAT Return data to HMRC using MTD-compatible software. Paper records will no longer be sufficient. Eventually, it will be mandatory for all businesses and organisations, whether they are self-employments, partnerships, limited companies, landlords etc. to use accounting software or at least a spreadsheet to keep accounting records. Importantly, paper accounting records will cease to meet the requirements of tax law, and this is a key issue.
When will it start?
By the time you read this, it will already have started. The implementation date is Monday 1 April 2019. Maybe not the best choice of date. For those initially required to comply, this will most likely mean for the VAT Return for the quarter ended 30 June 2019. By the VAT Return quarter ended 31 August 2019, all those required to be will be on the new system. Some businesses will have monthly or annual VAT Returns and have different start dates. For example, many farmers submit monthly returns due to regular VAT repayments. They would be affected for the Return for the month of April 2019.
Who is affected?
Eventually, all those stated above but the initial rollout will be mandatory for VAT registered businesses with a turnover above the threshold of £85,000. It is optional for those VAT registered businesses below the turnover threshold. From April 2020 (at the very earliest), quarterly reporting will become mandatory for income tax and corporate tax purposes for all businesses and landlords with a turnover above £85,000 (although this level may be adjusted before that date), and optional for those below.
How ready are your records for MTD?
So, if you fall within the first category, what do you need to ensure is in place?
- If you are currently using accounting software you will need to check that it has been upgraded to the latest version and is MTD compliant.
- If you are considering beginning to use accounting software we will be happy to discuss the process with you to ensure you adopt the most suitable package for your purposes. We can provide training so that you are comfortable that you are producing exactly what is needed.
- If you are currently using spreadsheets, you will need to acquire software that enables the returns from those spreadsheets to be filed under the new system. It is a module that sits in between your spreadsheet and the new government gateway. This is a service we can also provide without the need for you having to incur the cost of the spreadsheet module.
- If you currently use paper records, there will need to be a major change to your approach. You will need to adopt accounting software or at least spreadsheets to provide the minimum basic records to enable compliance. As an alternative, if you wish to continue to keep your records in that fashion, we are able to provide a bookkeeping service to convert the data into that capable of submission through the gateway.
Making Tax Digital is here to stay and will gradually affect all of the business community over the next three years. Early preparation can make sure you set off in the right direction. For those who have not yet taken appropriate action, it is not too late. We would be very happy to hear from anyone with concerns about the new system and those who require assistance in moving forward.
April 23rd, 2019