The Government has amended their plans for Making Tax Digital (MTD) so that under the reformed timetable only businesses with a turnover above the VAT threshold (£85,000) will have to start filing VAT information with MTD-compatible software from April 2019. In this initial phase of MTD, businesses will not need to provide HMRC with information more regularly than usual as VAT already requires quarterly returns. Businesses will not be asked to make the switch to MTD and update HMRC quarterly for other taxes until at least 2020.
While still supporting the MTD initiative as a necessary move to modernise and streamline the tax system, the Treasury have accepted the need to extend the timetable around MTD in order to ensure businesses are able to comfortably transition. This means that 3m of the smallest businesses and landlords will have the option to voluntarily make the switch to digital record keeping at their own pace before it becomes mandatory in no sooner than two years. To this end HMRC will continue with their Making Tax Digital pilot and will start to pilot MTD for VAT by the end of this year, initially on a small, private scale and then widening the scope into a public pilot starting Spring 2018.
Whilst we support HMRC’s vision for a digital tax system at BWM, we feel it’s crucial that businesses and the accounting industry are given adequate time to adapt to new methods of compliance record-keeping and where possible any new rules should also improve business productivity.
We will be working with our clients to ensure their readiness for digital VAT reporting and also their suitability to migrate to cloud based accounting systems such as Xero and QuickBooks Online which offers this capability, with the added advantage of allowing the accountant to ‘log in’ to review how things are going throughout the year. MTD is ultimately still a huge project for all businesses and landlords so do watch this space for further information and feel free to speak to us about the implications for you.