Businesses should start preparing for ‘making tax digital’ as deadlines loom

‘MAKING tax digital’ has faded into the background, and yet it is a future event that will be upon us before we know it.

Let us remind ourselves of what this is all about.

In 2015 HM Revenue & Customs (HMRC) announced that they wanted all businesses and property landlords with a turnover greater than £10,000 to use digital software to file their VAT returns and tax returns.

The second element to this, was that all Self-Assessment Tax returns had to be filed quarterly and the initial date for implementation of this was set for April 5 2018.

HMRC believe, and are probably correct, that they will receive more accurate records, and generate more tax revenue into the Exchequer. And if one wants to look for positives, using digital software does give the business owner an ability to more closely monitor their business with the reporting options that come with the software. The fact is, however, that there will be an inevitable increase in costs.

When it was all first announced this led to a lot of discussion, and the Federation of Small Businesses (FSB) were in the forefront of arguing that it was impractical to expect businesses, and especially smaller businesses, to have this in place by the original 2018 date.

HMRC duly conceded ground on this and they announced a postponement to April 5 2019 and this only for VAT-registered businesses to file their quarterly VAT returns - the implementation of filing of tax returns and quarterly filing was shelved for the short term. HMRC then set a new date for April 5 2020 for full implementation but yet again they were challenged and again conceded ground and a further postponement was announced.

So, the position is now that those businesses that are VAT registered with a turnover of less than £85,000 will have to go digital by April 5 2022.

This will then be followed by full implementation of ‘making tax digital’ including filing of self-assessment tax returns and quarterly filing by April 5 2023.

It remains to be seen whether pressure exerted will produce a further postponement. However, it is highly unlikely that this will happen, and 2023 will be the year for full implementation.

Both that 2022 deadline and 2023 deadline may seem a while away - and yet really in business terms they are not. There will be a considerable number of businesses having to move over to the new systems and this will without doubt exert pressure on the software companies and accountants to be able to move clients onto this software well in time for the deadline. There are options that owners can discuss with their accountants to minimise the problems that may arise.

Thus it is a prudent and sensible person that starts to look at what is available and prepare to set up and move over to filing well before the deadlines arrive and have everything in place and working.

The message is – be prepared.

John Mayer is the Somerset Area Lead for the FSB. His accountancy business is based in Weston-superMare