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17 July 2017

Making Tax Digital Update

Dan Woods Squared
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Making Tax Digital (MTD) has been in the news a lot in 2017 - the initial finance bill was cut down from 742 pages to a mere 140 and MTD went from potentially revolutionising the UK tax system to being on the shelf for a few more years. The government has decided to pushed the start date back to 2019/2020, this may still be subject to change.

The plan of MTD is to make all companies (with a turnover above £85,000) report quarterly through a digital platform. Many companies agree that digitising the tax system is the right direction of travel. However, many have been worried about how the reforms would be done. Mel Stride, the new minister of MTD says “We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”

HMRC believe that digitisation of the tax system will generate £500m in tax a year as they believe there is abuse of the current system which digital reporting will close down - the deferral time should give more time for testing and running a pilot for MTD by the end of the year followed by a live pilot starting in spring 2018, giving one year of testing before any businesses are mandated to the system.

John Preston, CIOT president, said: "Whilst we are supportive of the government’s long-term ambitions for digitising the tax system, we have always called for this to be achieved in a measured and manageable way."

"This deferral will give much more time for businesses, supported by their advisers, to identify for themselves, at their own pace, the benefits of digital record keeping. It will also ensure that many more software products can be developed and tested before mandation is reconsidered."

Luckily our clients who are already on Xero will be very well prepared for digitisation of tax. Xero are working with HMRC to make sure the platform is ready for the launch of MTD meaning the changes that our clients experience should be minimal.

For more information about cloud accounting in preparation for MTD go to our website by clicking here.

 

Woods Squared - Business Growth Accountants

Wirral Accountants based in Prenton