HomeTaxMaking Tax Digital (MTD): the saga continues

Making Tax Digital (MTD): the saga continues

Ian Vickers has more stories from a battle-weary software developer…

As you’ll doubtless remember, in December 2018 the government published the initial roadmap for Making Tax Digital (MTD), setting out the plan to make fundamental changes to the UK’s tax compliance system.

MTD would mean businesses, landlords and individuals would record and report income and expenses to HMRC digitally, and more frequently, rather than simply filing one year-end return.

This was delayed for individuals while the UK made preparations to leave the EU. However, reporting changes went ahead for businesses filing VAT returns (with a turnover of £85,000+) from April 2019. Traders who were VAT registered, but their turnover was below the threshold of £85,000, were able to voluntarily join the MTD scheme.

Then, in July last year, the financial secretary to the Treasury, Jesse Norman, announced that the Government was “setting out its vision for a trusted, modern tax administration system that is fit for the 21st century”, adding: “HMRC will expand its pilot service from April 2021 to allow businesses and landlords to test the full end-to-end service before the requirement to join.”

This was not unexpected, and frankly, our response was a collective shrug of shoulders. The extra cost, time and work is something we are used to – and sadly resigned to – when working with HMRC.

So are we to expect further delays? We’ll hold our breath there…

At present, the driving force of MTD is the need for tax information in a certain format. It should be more about the information businesses need for accurate record-keeping, which can help agents deliver a better service for clients, with reliable tax information being reported at the end of the process.

As for spreadsheet users, who knows?! They’ve said it before: “No spreadsheets will be countenanced.” As I write, the reality is that the only thing that’s happened is VAT – how many more variables are there likely to be looking forward? I can only speculate…

A large proportion of users have disparaged the rollout so far. Though it isn’t clear, it seems that HMRC have changed certain specifications: they either changed the way the software worked; or updated the documentation later.

Many businesses are now feeling secure that they’ve put the necessary links in place and have met all compliance needs. What may not have occurred to them is that being compliant is not necessarily being correct. It’s perfectly possible to have a digitally linked compliant VAT process that still contains errors, leading to you submitting an inaccurate return.

To reduce error, you need to have the capability to check your process; some means of flagging potential problems. A provision for some kind of ‘nudges and prompts’ was originally planned, but seem to have been quietly dropped.

At our end, we notice changes in the 18-month authentication period within the Government Gateway Account you’re using; usually this can be solved by re-connection.

You may not be even using the correct GGA. One business could have a number of Government Gateway Accounts, and only one would be the correct account for VAT. A simple operator error, so please check and double check!

Our clients know to give us a unique error reference code whenever they have an issue with our software, as this helps us to identify and rectify their issue as promptly as possible.

Key dates (at time of writing)

  • All VAT registered traders, regardless of their turnover, will need to follow MTD rules for their first return starting on or after April 2022.
  • Self-employed individuals and landlords with turnover above £10,000 will need to follow MTD rules for their next accounting period starting on or after 6 April 2023.

However, we continue to hold our breath for further changes and updates – and hopefully not waste too much time being busy fools.

Our Prelude software can assist you with ensuring your records are recorded for MTD purposes. Our cloud accounting team have specialist knowledge and can provide a range of services, including system implementation and training.

Ian Vickers is Managing Director of Prelude Software Limited. Email info@prelude.software or call 01656 725800.

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