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Businesses need to be ready for Making Tax Digital but is HMRC?

Businesses large and small need to be up to speed with requirements to file tax records digital which are being phased in by HMRC. George Bull outlines what needs to be done

We are now only six months away from Making Tax Digital (MTD) becoming a reality. On 1 April next year businesses trading above the VAT threshold will be required to keep digital records and submit VAT returns electronically.

In our experience businesses are at different stages in their preparation for the change: some are well engaged in the process but others seem not yet to have grasped that fundamental change is on its way.

Of course, there is another side to this: how well prepared is HMRC for MTD?

There are positive messages coming out of HMRC on all of this and there is a pilot programme underway which we hope will iron out some of the rough edges but like any other major change we will only be able to assess the effectiveness once it begins in earnest.

I don’t expect that the system will fall over, but neither do I suppose that everything will all work seamlessly. New software products, which are essential to making MTD work, are only now being launched onto the market place and there is very little time left for businesses to integrate these into their working processes.

HMRC has promised a 'soft landing' for the first year of MTD and will not be charging penalties for non-compliance with the electronic record keeping requirements and will for a while allow a certain amount of cutting and pasting data between programmes before insisting on a purely end-to-end electronic process.

Under the original plans for MTD we would of course have been far further down the line - remember the 'death of the tax return', which would have seen us all move to digital income tax returns this year? We don’t have any firm starting dates for MTD for income tax or corporation tax and given the huge pressures on HMRC resources resulting from Brexit there must be a question over the whole future direction of the programme. A lot may depend on how well the first year of MTD for VAT goes.

We have consistently supported the principle of greater use of digital technology to improve the operation of the tax system for taxpayers and HMRC alike. That remains our position but our concerns over the practicalities remain. We hope that the government takes a long hard look at how MTD for VAT has actually worked before making any further commitments for compulsory digitilisation of other parts of the tax system. If MTD really does offer the advantages to taxpayers that HMRC says it will then people will want to use it: compulsion should not be necessary.

 

 

George Bull is senior tax partner at RSM UK Tax and Accounting Limited

 

RSM experts will be running a series of MTD events across the UK between September and November 2018. The seminars are designed to provide attendees with a clear understanding of the MTD changes and their implications and to help businesses think more broadly about overall VAT compliance. All the details are available here:  https://www.rsmuk.com/events/making-tax-digital-events. Places are limited so early booking is advisable.

 

 

 

 

 

Businesses large and small need to be up to speed with requirements to file tax records digital which are being phased in by HMRC. George Bull outlines what needs to be done

We are now only six months away from Making Tax Digital (MTD) becoming a reality. On 1 April next year businesses trading above the VAT threshold will be required to keep digital records and submit VAT returns electronically.

In our experience businesses are at different stages in their preparation for the change: some are well engaged in the process but others seem not yet to have grasped that fundamental change is on its way.

Of course, there is another side to this: how well prepared is HMRC for MTD?

There are positive messages coming out of HMRC on all of this and there is a pilot programme underway which we hope will iron out some of the rough edges but like any other major change we will only be able to assess the effectiveness once it begins in earnest.

I don’t expect that the system will fall over, but neither do I suppose that everything will all work seamlessly. New software products, which are essential to making MTD work, are only now being launched onto the market place and there is very little time left for businesses to integrate these into their working processes.

HMRC has promised a 'soft landing' for the first year of MTD and will not be charging penalties for non-compliance with the electronic record keeping requirements and will for a while allow a certain amount of cutting and pasting data between programmes before insisting on a purely end-to-end electronic process.

Under the original plans for MTD we would of course have been far further down the line - remember the 'death of the tax return', which would have seen us all move to digital income tax returns this year? We don’t have any firm starting dates for MTD for income tax or corporation tax and given the huge pressures on HMRC resources resulting from Brexit there must be a question over the whole future direction of the programme. A lot may depend on how well the first year of MTD for VAT goes.

We have consistently supported the principle of greater use of digital technology to improve the operation of the tax system for taxpayers and HMRC alike. That remains our position but our concerns over the practicalities remain. We hope that the government takes a long hard look at how MTD for VAT has actually worked before making any further commitments for compulsory digitilisation of other parts of the tax system. If MTD really does offer the advantages to taxpayers that HMRC says it will then people will want to use it: compulsion should not be necessary.

George Bull is senior tax partner at RSM UK Tax and Accounting Limited

RSM experts will be running a series of MTD events across the UK between September and November 2018. The seminars are designed to provide attendees with a clear understanding of the MTD changes and their implications and to help businesses think more broadly about overall VAT compliance. All the details are available here:  https://www.rsmuk.com/events/making-tax-digital-events. Places are limited so early booking is advisable.

 

 

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