Making Tax Digital: Sadly, the Government doesn’t seem to understand…

1st February 2017 by Robert Leggett

On 31 January HMRC published the outcomes of last year’s six consultations surrounding Making Tax Digital.  Whilst we are still ploughing through the detail, it has to be said that so far the outcome has been rather disappointing, and it feels that HMRC and the Government are not listening to taxpayers, advisers, or their own MPs.  Businesses will certainly need the help of their accountants to be ready in time, and we will be in touch with affected clients in due course to assist.

The background is that MTD will force mandatory quarterly online reporting for businesses, who will have to keep electronic records in order to comply.  This includes all landlords with rental income over £10,000, or employees who might have secondary income from self-employment over £10,000.  The timescales for implementation are:-

  • April 2018 – Unincorporated businesses below the VAT registration threshold;
  • April 2019 – Unincorporated VAT registered businesses;
  • April 2020 – Limited companies.

There have been widespread calls for the implementation of MTD to be delayed.  This would have been sensible, given that the timescale is remarkably tight, especially since we are still missing so much of the detail, software has to be developed, and then millions of small businesses must implement it.  However, the scheme will proceed in 2018 as originally planned.

More frustratingly, it was previously announced that there would be exemptions and a deferral for certain sized businesses, but the size limits for this will not now be published until July.  This makes it very difficult for smaller businesses to plan, as they still don’t know if they will have to comply by April 2018 or not.  Sadly Government does not seem to understand that small businesses need the greatest certainty.

A number of questions were answered though, and many of these are a step in the right direction:-

  • Businesses will be able to use spreadsheets for record keeping, but will need to keep this in a format which can be converted by the new MTD software;
  • The smallest businesses, eligible for “three line accounts” will be able to submit a quarterly update with only three lines of data (income, expenses and profit);
  • Invoices and receipts do not need to be stored digitally;
  • Year end information must be sent in within 10 months of the last day of the accounting period, or by 31 January, whichever is sooner.  This is welcome, as the originally proposed 9 month deadline would almost certainly have seen Christmas having to be cancelled for accountants!
  • For partnerships with turnover above £10m, MTD will be deferred until 2020.

How can we help?

We will be working with our clients in the run-up to their implementation date, to help ensure you are ready.

For some, you may already be running appropriate software in such a way that transition will be easy, and we will only need to help explain what you need to do.  

For many, we will be able to help you implement or upgrade to appropriate new digital software and procedures so that you can comply yourself each quarter.

And for those who have no wish to get involved at all, we will still be able to deal with all of your reporting requirements on your behalf, without your having to get involved with the software.

Our flexible, tailor made service, will allow us to be involved as much or as little as you need.

Expect to hear more in the coming months!


Author

Robert Leggett

Robert Leggett

Partner
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