Clearview National December 2018 - Issue 205 | Page 66

BUSINESSNEWS
Are you ready for MTD?
» » 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
installers - 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
66 » DEC 2018 » CL EARVI E W- UK . C O M
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.
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
installers 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 installer.
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 installers 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 awareness had actually dropped
from 2017 to 2018, probably because of the
delays. Only 15% knew about MTD.
All this is probably because HMRC have
been poor at communicating MTD. And
with several deadlines already slipped, the
accountants that do know about it are loathed
to tell their clients until they are 100% sure of
no further slippage.
THE IMPACT ON INSTALLERS
Despite the likely slow start in enforcement,
all self-employed and business-owning
installers will eventually have to comply with
fines and the big stick.
There has been a lot of discussion,
particularly among accountants, of how
compliance can be achieved. As a result of
pressure from the accounting profession,
HMRC has changed some of the guidance,
particularly in relation to spreadsheets.
The bottom line for installers is that
records of sales and purchases must be kept
in electronic form from April 2019 for those
turning over more than £85,000 and from
April 2020 for those turning over more than
£10,000. VAT returns and quarterly profit