What the HMRC plan means for companies

Q What does the Making Tax Digital revolution mean? A From April 1 the vast majority of Vat-registered businesses will be required to submit their quarterly VAT returns digitally using Hmrc-compliant and approved software. Q Who will the changes affect? A All selfemployed people and small businesses that have a turnover above the £85,000 VAT threshold will be affected. This is estimated to be around 1.2million individuals and companies. Some businesses just under the threshold may also receive a letter through the post telling them that they may need to sign up soon. Q Why is it being introduced? A HMRC estimates that it loses £9billion of tax revenue each year because of carelessness and deliberate mis-reporting of VAT owed. It expects these changes to increase its tax intake significantly. Q How much are the changes expected to cost businesses? A The Federation of Small Business estimates that the reforms will cost each business £2,770 per year. HMRC has repeatedly played down concerns over cost and said that an average firm will pay a one-off “transition” cost of £109, plus £43 a year thereafter. Critics have argued that HMRC has not considered the time businesses must spend implementing new software and learning to use it. Q Is any free software available? A Some free software is available. However, many of the companies offering such programs will only guarantee its free use for a short period, for example, for six months. There is no guarantee free software will remain available in perpetuity.