Time for tax’s big dig­i­tal switchover

Belfast Telegraph - Business Telegraph - - News - Byjonathandickey, As­so­ciate di­rec­tor, Au­dit& As­sur­ance @grant­thorn­tonni

Mak­ing Tax Dig­i­tal (MTD) is a key part of the UK Govern­ment’s vi­sion to digi­tise the UK tax sys­tem. For busi­nesses and land­lords in gen­eral, it means that they will need to main­tain their ac­count­ing records dig­i­tally and to update HMRC on a quar­terly ba­sis.

Ac­cord­ing to HMRC, the driver be­hind the change is to help busi­nesses get ‘ their tax right’ and re­duce the amount of tax loss from avoid­able tax­payer er­rors, es­ti­mated at over £9bn a year.

The re­forms are an­tic­i­pated to take out around 10% of er­ror on an on­go­ing ba­sis. It is also sug­gested that the changes will give busi­nesses a clearer view of their tax po­si­tion — in year — and en­able them to plan to meet their tax obli­ga­tions at minimum cost and dis­rup­tion.

From April 1, 2019, busi­nesses that are VAT reg­is­tered and have turnover above the VAT regis­tra­tion thresh­old of £85,000 will be re­quired to keep dig­i­tal records and sub­mit their re­turn to HMRC via Mak­ing Tax Dig­i­tal (MTD) com­pat­i­ble soft­ware.

VAT reg­is­tered busi­nesses with turnover be­low the thresh­old can con­tinue to file their VAT Re­turns as they do cur­rently un­til at least 2020.

The re­quire­ment to keep dig­i­tal records does not ex­tend to in­voices and re­ceipts and HMRC has con­firmed busi­nesses can con­tinue to keep doc­u­ments in pa­per form. How­ever, the un­der­lin­ing trans­ac­tions will need to be stored dig­i­tally. Whilst it will only be manda­tory to sub­mit the nine fig­ures con­tained within the re­turn, HMRC can sep­a­rately re­quest the un­der­ly­ing data in order to val­i­date re­turns.

For many busi­nesses, the changes will re­quire them to re­view and pos­si­bly up­grade their cur­rent ex­ist­ing ac­count­ing sys­tems. Those busi­nesses that cur­rently main­tain their records on pa­per will need to en­sure the ad­di­tional in­for­ma­tion is cap­tured and en­tered onto spread­sheets and linked to HMRC’S sys­tem us­ing Ap­pli­ca­tion Pro­gram In­ter­face (API) or com­mer­cial soft­ware.

The Govern­ment has an- nounced it will not widen the scope of MTD be­yond VAT be­fore the sys­tem has been shown to work and suf­fi­cient time has elapsed to al­low the sys­tem to be fully tested. How­ever, in the longer term, the po­ten­tial im­pact on in­di­vid­u­als and busi­nesses of full im­ple­men­ta­tion of the orig­i­nal MTD roadmap would be a move away from the cur­rent sys­tem of fil­ing an an­nual Self-as­sess­ment or Cor­po­ra­tion Tax re­turn, to a sys­tem of ad­di­tional on­go­ing re­port­ing to HMRC.

It is pro­posed that MTD will re­quire busi­nesses and land­lords to update the ac­count­ing records on a quar­terly ba­sis, and to sub­mit a sum­mary to HMRC within one month of the quar­ter end. A pos­si­ble fifth and fi­nal year-end re­port may be re­quired.

Busi­nesses that rely on their accountants and the tra­di­tional an­nual process of gath­er­ing to­gether in­for­ma­tion to pre­pare ac­counts and sub­mit tax re­turns now face sig­nif­i­cant change to meet the quar­terly re­port­ing re­quire­ments of MTD.

April 2019 is fast ap­proach­ing so now is the time to think about what your busi­ness needs in order to be ready for MTD. For fur­ther in­for­ma­tion or ad­vice, Jonathan Dickey can be con­tacted at jonathan.dickey@ie.gt.com Grant Thorn­ton (NI) LLP spe­cialises in au­dit, tax and ad­vi­sory ser­vices

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