Having spent over 25 years looking after GDPs, I’ve long since learned to take most matters in my stride – the fast approaching introduction of Making Tax Digital (MTD) by HMRC however, is a real cause of concern for the profession and many UK taxpayers.
So what is MTD? – if you listen to HMRC, it’s a simplified tax system where bureaucratic form filing is eradicated, time delays are eliminated, with all taxpayers, including GDPs, having access to digital accounts providing a ‘real time’ update of their tax position. In addition, one of the key aims of MTD is for all accounting records to be kept digitally, meaning an end for paper systems and manual books – so what’s there to fear in all of this?
Let’s consider the reality. The concept of MTD was first issued as a consultation document early 2016, inviting feedback from all interested parties. Consistent feedback from all taxation regulatory bodies was concern over the timing of introduction – put quite simply, matters were being rushed by HMRC. What was HMRC’s response – carry on regardless, and so we have the first warning bell.
Whether we like it or not, MTD will roll out from April 2018 – if you are a self-employed dentist (sole trader or in partnership) this affects you. Quarterly reporting will be done digitally via software or an app but are you (or your software provider) ready? In addition to the quarterly reporting, there will be a final year-end submission which equates to the annual trading accounts and overall tax return position taken together. The quarterly reporting is intended to provide HMRC with an accurate snapshot of the business trading performance – will you be comfortable reporting to HMRC without prior clearance from your accountant?
We anticipate additional work and cost for GDPs, with initial costs for relevant software and training. Whilst financial penalties are unlikely for the first 12 months, this amnesty will then stop as HMRC favour financial penalties as a means of ensuring compliance. Interestingly, MTD provisions include the opportunity to make voluntary quarterly tax payments on a PAYG (Pay As You Go) basis – how long before voluntary becomes mandatory?
Putting this into context, many feel MTD has been rushed out. The testing process will not be complete until January 2019 but MTD starts April 2018. GDPs will need pro-active support as MTD becomes a reality. Importantly, at Campbell Dallas we already have plans in place to ensure our GDP clients are fully supported during the forthcoming transition period.
If you would like further guidance on how to start moving across to a digital platform, please get in touch with me here, or:
01786 460 030
The information in this blog should not be regarded as financial advice. This is based on our understanding in April 2017.