On 13th July 2017, accountants welcomed the deferral of Making Tax Digital (MTD). So surely this means you can think about the extra workload for another year or two?
In short, the answer is simply no. As Tax Product Manager for Thomson Reuters, I explain why in our latest on-demand webinar. I stress that MTD is not only imminent, but is happening right now. Making Tax Digital, it seems, is inevitable.
Only the admittedly unpopular aspects of MTD have changed, but it will still happen. The timeline might have changed, but the ethos of what HMRC wants to achieve is exactly the same as it’s always been.
What’s the major change to Making Tax Digital?
The announcement only relates to a deferral on certain aspects of digital recordkeeping and quarterly reporting for income tax, deferring until April 2020 at the earliest. This shifts focus to VAT which is now the main priority. It will affect VAT registered businesses by the new date of April 2019 (subject to turnover).
Submission will have to be via third party software in order to comply, meaning accountants still have work to do. On a positive note, you now have more time to consider the options.
Is the deferral an opportunity for firms?
It’s undeniable that digital is the only way forward, and the findings of our recent survey of over 800 accountants confirm this. Almost two-thirds of those surveyed agree the tax system needs to be more advanced. From my point of view it’s great to see there’s acceptance. The lengthened timeframe could enable accountants to reap the benefits of quarterly reporting, as opposed to it being an inconvenience.
We’ve been given the extra time that we asked for, so we all still need to engage with this process. This can of course be seen as an an opportunity; we asked for deferral – and now we’ve got 2 extra years to prepare.
Why accountants shouldn’t relax
Although income tax reporting has been deferred, we’re reminded that by 2020, it’s entirely possible that everything could become mandatory. I must highlight the fact that this could affect practices dealing with different types of clients unless they’re prepared.
My advice for accountants is to embrace the changes instead of remaining stagnant in your approach to processes, such as submitting tax returns.
— NFLambChap (@nickforsyth) August 3, 2017
Benchmark your level of preparation for Making Tax Digital with over 850 accountants with our Digital Readiness Report. Over 850 accountants in practice shared their opinions.
You should also consider the following:
1) How your internal processes will need to change
2) Educate your staff so they can engage with clients effectively
3) Ask yourself what record keeping tools you currently use
4) Check that your software is compliant
5) Assess software options which make MTD an easy process
Although the deferral only affects a small part of the full scope of Making Tax Digital, it’s important to remember that consistency will soon be the case across the entire process.
Focus has shifted away from income tax for now, but it won’t be long before we find ourselves in a totally digital tax world. Accountants have been given the rare gift of time; it’s up to you to use it to stay ahead. Getting that data digitally is the way that this process needs to go.
— Mazuma Accountants (@MazumaGB) August 3, 2017
Blog originally published 14th July 2017