Prepare for the future today
Despite the pause with the introduction of Making Tax Digital (MTD), it is still imperative accountants, small businesses and the self-employed move to digital tax sooner rather than later. HMRC has stated that the goal of MTD is to alleviate pain and errors caused by poor paper record keeping, yet have just pushed this benefit of digital records out by two years to those who would benefit from it most.
This delay has caused people to question what this means for the accountancy sector, but the change of scope does not diminish the industry’s commitment to MTD. However, the delay in timings will resonate with many accountancy professionals, as they were calling for this late last year. In fact, we found only 40 per cent of the accountancy industry were confident it would be ready for the introduction of MTD by April 2018, so many will be very happy to hear of the delay. Our research has shown that practices that are already adopting digital solutions are benefiting from greater efficiency and collaboration with their clients, so the market trend is pushing this adoption regardless.
Keeping VAT on track
Only businesses over the VAT registration threshold will have to keep digital records from April 2019. Businesses that are already VAT registered have to make quarterly VAT submissions so the transition to another reporting platform should be straightforward but they should assess whether their current solutions will be supporting MTD for quarterly VAT submissions.
Preparation is key
Over 1,000 accountants responded to our November 2016 MTD survey. A key finding was that 25 per cent of their whole client base use Excel to keep their records and 20 per cent use no software at all. It’s fair to assume that the figures for Excel usage or no software usage for VAT registered businesses will be a little lower but that still leaves many businesses needing to change their processes to maintain their records digitally. There are many benefits of digital record keeping and we encourage businesses to make the change sooner rather than later. New processes take time to bed-in and accountants have a key role to play in ensuring a successful transition.
So should you still be actively planning MTD?
The revised schedule will ensure MTD is still delivered and provides more time for education – 98 per cent of UK accountants felt HMRC has not been clearly communicating with them or their clients on the changes required for MTD, so this will certainly provide more time. Accountants need to make the best use of this time.
The key concern with such a substantial delay is the legislation will be out of sight and mind for many accountants, small businesses and the self-employed. There is a significant risk that complacency will spread and before we know it, deadline panic will set in again.
What’s your view?
Our thoughts on MTD are clear but we are keen to understand your views. To help determine this we have created a short (10 question) survey to gauge the opinion of accountants. Please spend a few minutes completing the survey here and we will share our findings with you in due course.