Introduction to Making Tax Digital
With just over 2 weeks to go until HMRC’s new project goes live just how successful had the making tax digital project gone so far?
Almost every professional and trade body has urged HMRC to delay the implementation of MTD. They all believe that the cost of implementing the new rules will be too onerous for smaller businesses.
House of Lords Review
The House of Lords heavily criticised HMRC’s implementation of MTD. Their report findings included the following comments:
- HMRC is alone in its confidence that all one million businesses will be ready for Making Tax Digital for VAT in April 2019.
- The costs to businesses of MTD for VAT will be far more than HMRC’s impact assessment.
- HMRC must publish how its communication and support systems will meet the needs of taxpayers and agents across different levels of digital capability and skills.
- So far, no free software products have been offered by the software industry. The smallest businesses will struggle unless HMRC provides a basic free software option.
- The Government should publish its plan for the long-term development of MTD, including milestones and when key decisions will be made.
- The Government must wait until at least April 2022 before Making Tax Digital is extended to other taxes in order for lessons to be learnt before the programme’s implementation.
- The penalties regime could be fairer and encourage taxpayers to remedy defaults promptly by giving taxpayers a longer grace period before penalties for late payment are applied.
- The Government’s claim that MTD for VAT will increase the amount of tax collected remains unconvincing. They should revisit their assumptions and publish another revised impact assessment.
- Neither Treasury nor HMRC are taking the risks to implementation of Making Tax Digital seriously enough.
Lord Forsyth of Drumlean, Chairman of the Economic Affairs Committee, said:
“HMRC has neglected its responsibility to support small businesses with Making Tax Digital for VAT. HMRC are not listening to small businesses, while offering a six-month deferral to many in the public sector. Small businesses will not be ready for this significant change to their practices if it is introduced on 1 April, particularly with Brexit taking place three days earlier. The Government must delay its introduction.”
If you are struggling to understand what will be required when the new MTD rules come into force on 1 April 2019, please contact us.
Primotax is a forward-thinking digital accounting and specialist tax practice. Our mission is to help our clients grow using our expertise in tax and technology.
What do I need to do?
- Firstly you need to understand whether you need to file VAT returns under the new MTD platform. Not all business need to use this platform.secondly Understand when your first return will be filed under MTD – This is likely to be the first full return due after 1 April 2019.
- Implement appropriate software to allow filing via the MTD portal, we use Xero and Quickbooks within our practice which are all MTD ready software but there are a variety of options depending on your need. Be aware that transferring to cloud software mid way through your financial year could be time consuming so research the options thoroughly.
- Understand how MTD will impact on the sharing of information within your finance system. If you use separate software for timesheets, project management and billing care need to be taken as you need to maintain a digital link between the systems.
- Sign up for an MTD account and let HMRC know you will be filing your VAT returns using MTD software. Once done you will no longer be able to use the old manual VAT portal so be sure that you are ready otherwise you may find that you cannot file a VAT return. Your accountant can also do this for you. See the link to HMRC’s guide to signing up – HMRC’s guide to signing up for MTD
- Finally, if you are unsure take advice, do not leave it until the last minute.
HMRC are ploughing ahead regardless of the readiness of UK small businesses. You may have recently received a letter from HMRC announcing the start of MTD on 1 April 2019 but many businesses are unprepared and do not understand what they actually need to do.
There are a number of steps you must take if you fall within the MTD rules to ensure that you will be able to continue filing VAT returns, your accountant should have already gone through the steps and timing in detail. If not please feel free to contact us for a free consultation.
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