Posted 11 February 2019 By Clare Bowen, Client Portfolio Manager
The words on all accountants’ lips at the moment are ‘Making Tax Digital’ – HMRC’s initiative to modernise the tax system, reduce errors and ensure everyone pays the correct amount of tax.
With just weeks before these new regulations come into effect on 1 April 2019 – and it likely to come into effect for other taxes in April 2020 at the earliest - there are still a number of myths and misconceptions around the changes.
Myth 1: Businesses below the VAT threshold will need to comply
VAT registered business with taxable turnover below £85,000 can continue to use the current online VAT portal. However, HMRC will be encouraging everyone to switch to the new regime.
Myth 2: The VAT threshold will be reduced to drag more businesses into MTD
We know already that the VAT threshold of £85,000 is frozen until April 2020, but it is possible that the limit could be removed or lowered, following the Government’s recent call for evidence of the benefits to business in changing the threshold.
Myth 3: Paper records are adequate so long as the totals are recorded in MTD software
Whilst you can keep a paper copies, your software must record each and every transaction, including details of the time of supply, value of supply and input tax. Additionally, a separate electronic record is required for each VAT supply made or received.
Myth 4: HMRC will receive details of each and every transaction
The information to be submitted to HMRC under MTD will be the same as the information currently submitted. There may be an option, or requirement, in the future to submit additional voluntary information, however, for now no additional data will be sent to HMRC.
Myth 5: It will not be possible to use spreadsheets to comply with MTD
Spreadsheets can be used to record transactions but a suitable “bridging product” will be required from a software supplier. There are downsides to continuing to use spreadsheets, as are they are prone to error and do not provide a future proofed solution. Software packages may be more cost effective thanks to the additional benefits they offer.
Myth 6: Free software will be available
We can safely say that HMRC will not be providing free software. Whilst it is likely that free software will be developed by a third party, it is unlikely to cover MTD requirements and you do tend to “get what you pay for”.
Myth 7: Businesses will need to make quarterly payments of income tax based on the quarterly returns
There are no plans to change to date for payments of income tax, VAT or corporation tax.
Don’t panic if you haven’t prepared your business for MTD, it’s not too late. We have a specialist team to help businesses be ready for MTD.
For more information please call Clare Bowen on 01793 818300 or send her an email