Making Tax Digital
19th December 2016
As the festive season approaches, and I grudgingly accept that I will once again try to enjoy Xmas, it is a time to wind down and relax.
And, before you know it, a new, potentially stressful, activity at work hoves into view.
After it was explained to me, I agreed to join in. And then… What to buy? I haven’t a clue.
Anyway, I am happy to report the decision has been made, the present acquired and wrapped. I am ready for Secret Santa.
But what is this? A new challenge to rise to. Christmas Sweater Day. But I do not possess a Christmas Sweater….. Piece of cake. I’ll get a Christmas Sweater. Of course I left it to the weekend before Xmas and took the long journey from my home computer to my good friends at Amazon. They haven’t syphoned money from my bank account in over a month and they were glad to hear from me again.
Perfect. Hundreds of Christmas Sweaters to choose from. Home and dry.
However, there may be hundreds of sweaters on Amazon, but when you get to the delivery dates they are mostly after Xmas now. Most sensible people in the market for a Xmas Sweater have already made their purchase, so the stocks are dwindling…… Eventually I found one, which I have ordered, with an express delivery date given as “20-22 Dec”. The Parry Hancock Christmas Sweater Day is 21 Dec, so I reckon I have a 50:50 chance of appearing in the office wearing the required apparel on the 21st.
I’m happy with 50:50.
The odds for Making Tax Digital (MTD”) though are a dead cert 100%.
Despite howls from the Accountancy profession that HMRC’s proposals for MTD are unnecessary and problematical, HMRC is ploughing on.
Most Accountants have deliberately delayed telling their clients about MTD because the proposals keep changing and there is no point in worrying everyone unnecessarily. We are expecting confirmation of the final details from HMRC in January. At that point we will start to formulate our plans for helping clients make the transition.
I say “transition” because things are going to change.
Initially only sole traders and partnerships will be affected. For them, MTD is planned to start in April 2018.
Limited companies and directors will join the fun later, after separate consultations.
MTD will involve some form of digital quarterly reporting to HMRC, plus an End of Year Declaration.
Small businesses with annual sales below £10,000 will be exempt. Everyone else will have to provide quarterly digital information to HMRC.
HMRC is being urged to increase the exemption to align with the VAT Registration threshold, but it is thought they will stick with £10,000.
Businesses will therefore have to use “digital record keeping software that links to and updates business’s digital accounts with MTD”. If you are using modern cloud-based software such as Xero (which many of our clients are) you will be OK, as you will be able to report direct from Xero – but you will still need to do something extra each quarter.
Many small traders are currently keeping manual records, or maybe spreadsheets, and banking their business income into their personal bank accounts. This will have to stop. These traders will have to set up a separate business bank account and use compliant accounting software to do their bookkeeping.
We are keeping an eye on these proposals and will be helping clients convert from manual to digital reporting where and when appropriate. We will be helping all clients, from whatever starting point, make the transition to this new quarterly relationship with HMRC. Hopefully the new HMRC systems will allow us as Agent to deal with much of this on behalf of clients. Our aim, as always, is to take the strain away from clients, leaving them to concentrate on running their businesses.
It would probably be a good idea for affected sole traders and partnerships to convert to digital bookkeeping from April 2017. This would provide a year to iron out teething troubles before the mandatory digital quarterly reporting begins.
Please contact me or Lucy on 01489 885772 if you want to discuss how MTD will affect you, and how we can help you convert to digital bookkeeping.
19 December 2016