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» » 2018 HAS BEEN ‘THE YEAR OF GDPR’.
Much was made of GDPR in the news.
That included the fact that the size of fines
for abusing data had gone through the
roof. Many companies climbed on the
band-wagon and there was a lot of noise,
some from people who frankly knew
little about the subject. Once the May
deadline had passed, it all seemed to go
very quiet. Now, the ‘big hairy’ regulatory
development is MTD (Making Tax Digital)
from HMRC, which we can all expect to
hear a lot more about in the near future.
Benjamin Dyer, CEO of Powered Now,
looks at MTD and asks whether it is more
or less significant than GDPR, and what it
could mean for businesses like yours…
When we look at Making Tax Digital it
would be easy to think it will be a damp
squid a little like GDPR turned out to be.
That was particularly true for any smaller
businesses not engaged in questionable
data practices. It has certainly seems to
have had little impact on ‘one man band’
outfits.
However, the bad news, at least in the
short term, is that MTD is going to have
a large impact on smaller companies –
including locksmiths - even despite the
fact that MTD has had several false starts.
In this article I will try to explain why.
WHAT IS MAKING TAX DIGITAL?
MTD is HMRC’s attempt to drag
themselves, and us, into the 21st
Century.
It’s all about moving to computerised
record keeping for all tax affairs. In
the future we will be expected to
communicate with HMRC electronically
both for business and with our personal
affairs. We will also be expected to justify
submissions to HMRC with electronic
records that show how the numbers were
put together.
There is a rolling program of
implementation over several years
and some parts have already been
implemented although there is currently
a pause in the rollout of MTD for
individuals.
The next deadline for businesses is April
2019 when all VAT registered businesses
are required to, for their first VAT period
starting on or after April 2019, submit
quarterly VAT returns electronically. An
audit trail of transactions must be held
electronically which justifies the VAT
totals. This is different from submitting the
VAT return online. There must be a direct
connection from the new VAT return and
the transactions that went into it. This
information must be held on a computer.
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Then in April 2020 there is a
requirement for all businesses with sales
greater than £10k to submit a quarterly
profit and loss statement for corporation
tax reasons. Again, this must be backed
up with electronic records that justify the
submission.
The two deadlines mean effectively that
all locksmiths will have to keep electronic
records of their sales and purchases. The
deadlines are April 2019 for businesses
with sales over £85,000 and April 2020 for
installers with sales over £10,000 i.e. pretty
much everyone.
There are a few exemptions from MTD
based on religious objections, insolvency,
or practical issues like no internet
connection available, disability and age. It
is highly unlikely any of these will apply to
a typical locksmith.
Of course, HMRC has its own reasons
for moving to MTD. One can speculate,
but the biggest driver seems to be to close
the ‘tax gap’ i.e. tax avoidance.
WHAT ABOUT THE DEADLINE?
Making Tax Digital is expected to be
the most fundamental change to the tax
administration system for more than 20
years. HMRC has already put various
deadlines back a couple of times and it’s
possible that they will again. Having said
that, this now seems unlikely given that
we are less than six months from the next
deadline. After all, the provisions have
already been put into law. Alongside
the debate about whether the current
deadlines will stay in place, it’s clear that
enforcement will start very low key and
then build up, with only warnings given
for non-compliance in the first instance.
Overall there is no point in wasting
energy bemoaning the arrival of MTD.
A number of countries have already
implemented something similar and there
is no chance that it won’t happen here.
Despite all of this, many locksmiths
remain unaware of MTD. Given that a
recent survey by accounting software
company Xero found that 25% of
accountants hadn’t heard of MTD, it’s
hardly surprising that the rest of us are in
the dark. The customer survey conducted
by my company Powered Now found that