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Tag: Making Tax Digital

Key changes to Making Tax Digital scheme announced

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HMRC has announced its revised plans for its Making Tax Digital scheme affecting businesses – and it seems to have listened to common sense.

MTD, as originally announced, came in for a barrage of criticism from accountants, tax experts, businesses, and politicians from all sides. It would have seen everyone turning over more than £10,000 forced to keep digital records and file quarterly returns, beginning next April.

The new announcement sees changes to which businesses are affected, when, and even which taxes it relates to. The key points of the revised scheme are:

  • MTD will only apply to VAT until at least 2020
  • Businesses below the VAT threshold (currently £85,000) will be able to opt-in if they want but it won’t be compulsory – yet

The scheme will begin in April 2019. From that date, businesses over the annual registration threshold will have to keep digital records for VAT purposes, providing their VAT information to HMRC through MTD software.

MTD for VAT will be piloted using small-scale private testing towards the end of this year, with a larger live pilot next spring.

The Treasury says businesses with a turnover below the VAT threshold can choose to use MTD, and opt in for other taxes, ‘benefitting from a streamlined, digital experience’. It is not clear when this will be from.

It also says it will not extend MTD to other taxes until the scheme has been shown to be working well, or April 2020 at the earliest.

In my previous blogs on MTD, while arguing against the timescale and requirements, I pointed out that having up-to-date information really benefits businesses and day-to-day decision making.

So while many business owners will be happy to have dodged a bullet for now under these revised MTD rollout plans, the Treasury remains committed to a digital tax future. As it says, millions of businesses are already banking, paying bills, and interacting online. Digitising routine business tasks such as record keeping is the next step and is one many businesses have already taken.

For help and advice on record keeping, and how to get the most out of your accounts, contact us here at Altus.

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Making Tax Digital – U-turn or just a delay?

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Businesses can breathe a (temporary) sigh of relief after the Government quietly put its Making Tax Digital plans on the backburner.

You might have missed this latest backtrack (remember the U-turn over NI changes for the self-employed?) because it was ‘announced’ around the time the General Election was called.

The plans were due to have been included in the final Finance Bill of the Parliament, but were dropped along with a number of other items. However the Government isn’t saying the scheme has been scrapped, so small businesses are not out of the woods yet.

The main proposals of MTD are:

  • All businesses with sales of more than £10,000 will be required to maintain their accounting records in a digital format.
  • Not only will there be a requirement to complete an annual tax return but also quarterly returns.
  • This means that not only will your records need to be in a digital format but they will need to be up to date, at least on a quarterly basis.

Making Tax Digital was due to begin a roll-out next April. But the consultation period saw it come in for a barrage of criticism, not least from accountants, tax experts and even the cross-party Treasury Committee.

Now it is hoped that some of these criticisms may be listened to and the scheme amended. I suspect that far too much time and money has already gone into this for it to be abandoned, but here’s hoping the Treasury sees sense and drops the requirement for sole traders and very small businesses, and rethinks the quarterly returns which will add so much to the workload of people trying to run businesses.

As we said in March, having up-to-date information is so important, helping people make better informed business decisions. But this was a badly thought-out scheme which was in danger of being rushed in too quickly.

In order to get the Finance Bill through before Parliament was dissolved, some 600-odd pages were dropped from it. So perhaps we are being optimistic in seeing this as the Treasury realising MTD needed more work – or was a plain dumb idea. It may well be back on the table under the new Parliament, so watch this space!

For more advice on this, or how to keep up-to-date accounting records, contact Altus Business Consulting

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What you need to know about Making Tax Digital

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Making Tax Digital (MTD) is the latest brainwave from the Treasury, and is going to impact pretty much every business in the UK.

We are finally beginning to get some detail fleshed out on the bones of this tax announcement, originally made in the 2015 Budget. We accountants have been pouring over the responses to the consultation process that has been taking place. So what is the digital tax revolution all about?

Making Tax Digital requirements

  • All businesses with sales of more than £10,000 will be required to maintain their accounting records in a digital format, so out the window with those manual records.
  • In what has been termed ‘the end of the tax return’, not only will there be a requirement to complete an annual return but also quarterly returns with varying levels of detail depending on the size of the business.
  • This means that not only will your records need to be in a digital format but they will need to be up to date, at least on a quarterly basis. They will have to be in sufficient detail and accuracy that you will be able ­- and perhaps more importantly be happy – to complete a return to HMRC.

Accurate bookkeeping

This truly sounds the end of bringing a box of receipts to your accountant at the year end. All businesses will need to either maintain those records themselves or ask their accountant or bookkeeper to keep those digital records up to date.

It is understood that spreadsheets will be an acceptable method, but of course they do need to be accurate enough to produce the necessary quarterly reporting. HMRC states that free software will be made available for the smallest of businesses with the simplest affairs but it is unclear at this stage how comprehensive that will be.

It is likely that this is going to force more small businesses to move over to cloud-based bookkeeping systems as they try to balance the additional cost of maintaining their records to the required standard (read more on cloud bookkeeping here)

Many businesses, whether they currently use digital methods of bookkeeping or not, will have to significantly change their current processes to comply. Especially those that are below the VAT threshold and have not had to deal with any form of quarterly reporting before.

Tax timetable

When is all this happening? Well, not as far away as you might think. The current plan is that Making Tax Digital will apply from April 2018 – yes, just 12 months away. In a concession HMRC has announced that businesses below the VAT threshold will have a further 12 months to comply (April 2019).

However, this change is starting with sole traders and limited companies will follow on afterwards.

Of course all businesses should have accurate and up-to-date accounting records already, to provide good information for business decision making. Unfortunately, it is still all too common for business owners to ‘learn to their surprise’ about the results for the year when they sit down with their accountant 6 months after the year end!

Perhaps MTD will have a positive impact on businesses. There is so much information for making better, more informed business decisions hidden away in the accounts systems of small businesses.

Too many business owners see the bookkeeping as just a cost necessary to keep the taxman happy. This new requirement may be the catalyst needed to push that information into the light. Perhaps it will get business owners to seek some value from the extra work that undoubtedly will be required.

If you are worried about getting compliant with new digital requirements, want assistance with your bookkeeping or need more information to make better business decisions then Altus is here to help. Contact us here

 

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