18 | NOVEMBER 2018
News
Read online at www.proinstaller.co.uk
IS MTD THE NEW GDPR?
This last year was “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 and
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.
When we look at Mak-
ing 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 question-
able data practices. It has
certainly had little impact
on installers.
However, the bad news,
at least in the short term, is
that MTD is going to have
a large impact on installers,
even though 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 electronical-
ly both for business and
with our personal affairs.
We will also be expected
to justify submissions to
HMRC with electronic
records that show how the
numbers were put togeth-
er.
There is a rolling pro-
gram of implementation
over several years and
some parts have already
been implemented al-
though 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 to-
tals. 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 justi-
fy the submission.
The two deadlines mean
effectively that all installers
will have to keep electron-
ic records of their sales
and purchases. The dead-
lines 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 exemp-
tions from MTD based on
religious objections, insol-
vency, 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 have
their own reasons for
moving to MTD. One can
speculate but the biggest
driver seems to be to close
the “tax gap” i.e. tax avoid-
ance.
What about the
deadline
Making Tax Digital is ex-
pected to be the most fun-
damental change to the tax
administration system for
more than 20 years. HMRC
have 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 6 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 bemoan-
ing the arrival of MTD. A
number of countries have
already implemented some-
thing 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 re-
cent survey by accounting
software company Xero
found that 25% of account-
ants 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 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 in-
stallers 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 have changed some
of their guidance, particu-
larly in relation to spread-
sheets.
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
and loss statements must
be derived directly from
these electronic records
and submitted electronical-
ly to HMRC.