Clearview National November 2019 - Issue 216 | Page 75

BUSINESSNEWS
want to go back to the quill and pen, maybe
backed up by abacuses and hand operated
calculators. MTD is pushing both businesses
and individuals to keep computer records but
also to communicate digitally with HMRC.
It seems unlikely that it will ever be rolled
back.
WHAT IS MTD FOR
PROFIT AND LOSS?
MTD for profit and loss, also known as
MTD for corporation tax or income tax
(for sole traders), will require every single
business with sales of more than £10,000 per
annum to submit quarterly profit and loss
returns electronically.
This means that everyone that is actually
making a living from their business will fall
under the new rules. It embraces every little
cottage industry. While MTD for VAT hit
over a million businesses, MTD for profit
and loss will impact several million.
It is likely to lead to an explosion in the
use of computers and the need for a vast
amount of support. After all, VAT registered
businesses with minimum sales over £85k
can afford an accountant. Most of these
smaller businesses impacted by MTD for
profit and loss can’t.
Unknown to most, there is already a pilot
program of MTD for profit and loss even
though it won’t become compulsory for at
least a couple of years.
Things may change, but the way the pilot
works is:
• For each quarter, software will be
used to send an expenses and income
summary to HMRC
• As a result, an estimate of the tax due
can be seen at any time
• After the end of the accounting
year, there is a final submission of
expenses and income, including any
adjustments
• Personal income or business allowances
or reliefs must be submitted. This can
happen at any time during the tax year
• Finally, the tax calculation for the year
can be viewed
WHAT IS THE IMPACT
LIKELY TO BE?
The impact is likely to be a lot of
complaining, followed by the widespread
adoption of computer software to help run
businesses. Unfortunately, the reality is that
getting businesses to adopt new approaches is
hard.
‘Unknown to most, there is already a pilot program
of MTD for profit and loss even though it won’t
become compulsory for at least a couple of years’
The problem with MTD for VAT was that
only tens of thousands of companies were
involved in the pilot and nearly a million
are having to adopt MTD in a three-month
period. That is a recipe for disaster. At the
same time, the communication program to tell
people about MTD was far too low key.
The way this should have been done was
to have an initial pilot, as was done. But then
to have heavily communicated compulsory
adoption on a rolling basis, for instance by
company name in alphabetic order. HMRC
could then have controlled the speed of
adoption over time.
In comparison with MTD for VAT, GDPR
had a huge amount of publicity and a lot of
resultant fear. You could say that this was
bad, but the good news was that it got taken
seriously. In contrast, HMRC has emphasised
a light touch to enforcement of MTD which
simply encourages procrastination. Since we
will all have to comply eventually, it’s less work
to do it once and to do it properly.
Given the approach being taken to MTD
for VAT, it has to be said that full adoption of
MTD is likely to go on over a period of several
more years. But as the CEO of a software
company that may well benefit from MTD,
you should treat my words with a degree of
cynicism. Unless MTD is abandoned, about
the only thing that you can say for certain
about MTD is that software companies are
going to do well!
WHEN WILL MTD FOR PROFIT
AND LOSS ARRIVE?
The Making Tax Digital program has
already been delayed several times and the
delays have already added up to years. At
the time of writing, MTD for VAT is being
implemented, but there are still hundreds of
thousands of businesses to come onboard.
Because of the slowness of the MTD for
VAT rollout, HMRC made a last-minute
compromise by allowing “bridging software”.
This allowed data to be put into MTD in a
similar way to the current web form. HMRC
will need to disallow this to get the full benefit
of MTD for VAT but with many companies
opting for this approach, there is actually still
a major adoption curve to come. The truth is
that MTD with bridging software is MINO –
MTD in name only.
Because of delays with MTD for VAT,
MTD for profit and loss has been delayed.
This seems sensible and we will probably have
a better idea whether there will be further
delays once both MTD for VAT and Brexit
have passed. MTD has already suffered from
the diversion of resources to Brexit.
So, the answer to the question of dates is
that MTD for profit and loss will arrive by
2021 “at the earliest”.
THE ATTITUDE OF THE
ACCOUNTING PROFESSION
I regularly read comments on accountant’s
forums discussing Making Tax Digital. It
has been amazing how negative many of
them are. I guess that this illustrates how
much resistance there is to change. Naysayers
have dominated the discussions. But it was
interesting to see the comments that came
back when one accountant recently stated that
they were thinking of non-complying. That is
because so many people had said how difficult
it was. Following this there was a flurry of
accountants saying that they had got their
clients up and running on MTD for VAT with
no problems.
IN SUMMARY
Computerising business records and tax
returns has got to be good news if we want
rising standards of living, which in turn
depend on improving business efficiency.
However, there are a number of mountains
to climb before everything is fully up and
running. HMRC have not really distinguished
themselves with the professionalism of the
programme so far. Here’s to hoping that they
will do better in the future and that we can all
eventually prosper as a result.
ABOUT THE AUTHOR
Benjamin Dyer is CEO and co-founder of
Powered Now. Powered Now’s mobile app
aims to take the pain out of paperwork for
electricians, gas engineers and builders as well
as other trade businesses.
www.powerednow.com
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