Business First September 2017 Business First September 2017 | Page 17
It’s making tax digital not making tax
difficult
by Adrian Patton, ASM Chartered Accountants
report summary information to HMRC
quarterly through their ‘digital tax accounts’
and then make an end of year declaration
through the same system.
Unfortunately, it is clear that there will be a
significant cost to tax payers, and increased
pressure on both advisors and clients to
meet five reporting deadlines during a year
rather than one.
What is Making Tax Digital for business?
Making Tax Digital (or “MTD”) is a
government initiative that is set to transform
the tax system for businesses. The aim of
MTD is to make tax administration more
effective, more efficient and easier by the
implementation of a fully digital system.
MTD is the biggest change in tax
administration in recent years and will affect
every business in the UK.
In particular it will change the way
businesses are required to keep their
accounting records and the way they report
their income and expenses to HMRC.
What are the requirements of MTD?
Under MTD the main requirement will be
to maintain digital accounting records for
your business.
Businesses must submit quarterly updates
to HMRC and also provide an ‘end of year’
return – whether this makes it “easier” to
maintain a business’s tax affairs is a matter of
some debate.
Who does MTD apply to and when does it
start?
The start date for MTD has been
continually changing – based on the latest
HMRC guidance the following applies,
however, this may be subject to change:
• Businesses with turnover greater than
the £85,000 VAT threshold will need to
keep digital records from April 2019, but
only for VAT purposes;
• Businesses with turnover greater than
£85,000 will not be expected to report data
quarterly to HMRC until at least April
2020;
• Any business/landlord can voluntarily
keep digital records and report data
quarterly to HMRC from April 2018; and
• Businesses/landlords with turnover less
than £85,000 will not be required to keep
digital records or report quarterly to HMRC
on a mandatory basis. While this reflects
current guidance, it is widely anticipated
that at some point in the future digital
reporting will become a requirement.
What are digital records?
A digital record is a record of data for each
transaction of the business.
The proposed minimum required data will
be invoice date; invoice value; income or
expense category and details of any amounts
deducted/deductible at source.
HMRC has stated that it won’t provide its
own software but it will ensure that basic
apps and software products are available for
businesses with the most straight forward
affairs. However, it is envisaged that most
businesses will be required to use more
comprehensive third party software (e.g.
Cloud based packages such as QuickBooks or
Xero).
HMRC are aware that a lot of businesses
currently use spreadsheets to record their
data and have now confirmed that they will
be an acceptable form of digital record.
However, users will need to ensure that the
spreadsheet is able to meet all the necessary
requirements of MTD and that it is able to be
submitted to HMRC in a MTD compliant
format. HMRC have stated that this is “likely
to involve combining the spreadsheet with
software” so it is not wholly clear on the
detail yet.
While the use of spreadsheets is a welcome
concession, the practical realities are likely to
mean that using MTD compliant software
will be a more efficient option.
How does this impact on clients?
The roll out and impact has already begun.
Individual tax payers and businesses have
access to a digital account that they can use
to check their records and manage their
details with HMRC. At the moment,
businesses keep their accounting records in a
variety of ways, on paper (manual records),
spreadsheets or accounting software.
These records are then used to prepare a
tax return for the business or individual at a
later date. With MTD, those individuals and
businesses who maintain manual records
will need to adopt digital records using
software or apps.
Businesses and individuals will have to
Is there any good news?
Yes, the rationale behind MTD is a good
one. The ability to have a digital account
with HMRC which deals with all the tax
affairs of a business in one place is a
welcome idea.
The changes will also help improve the
quality of recordkeeping for businesses,
reducing the likelihood of mistakes, and help
businesses to manage their affairs more
effectively.
Business owners will now have access to
information on a timelier basis which will
offer insight into their business performance
and this will aid decision making.
This is also an opportunity for some
businesses to get control of their finances, to
simplify and modernise their systems, in
order to give them valuable information at
the right time.
What can ASM do to assist with the
transition and the new reporting
requirement?
ASM Chartered Accountants have prepared
a number of solutions for dealing with the
transition to MTD and have invested in a
range of MTD compliant software that can be
used by businesses of all sizes and
complexities. These solutions can be tailored
to your business’s needs and with our help
we can assist you in meeting the
requirements of MTD. MTD will transform
the world of accounting and taxation but
with our help we can ensure your business is
focused on Making Tax Digital and not on
making tax difficult.
MOREINFORMATION
Adrian Patton is a Senior Manager at
ASM Chartered Accountants. If you
require any further details on MTD
please contact him at
[email protected] or
on 028 9024 9222.
Alternatively contact
[email protected] or
[email protected]
www.businessfirstonline.co.uk
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