‘Tax Doesn’t Have to Be Taxing’ as those HMRC adverts on the telly used to tell us in the noughties.
But very soon tax will have to be digital in 2019.
From April 1 as a result of Making Tax Digital (MTD), most UK businesses above the £85,000 VAT turnover threshold will need to keep records digitally and submit VAT returns to HMRC using MTD-compatible software.
On the one hand, it’s 2019. Are we not a little surprised that tax hasn’t already gone online along with so many other sectors and services?
But on the other, it’s important to note that this is another change for businesses, following in the wake of numerous other regulations of late (not least of which last year’s GDPR).
As Claire Reading from the Federation of Small Businesses (FSB) – South Yorkshire, East Yorkshire and The Humber says: “These are all additional burdens on businesses at a turbulent time. Making Tax Digital is due to come into force on the UK’s first day outside the EU – with continuing uncertainty about VAT on transactions between the UK and EU.
“It will be an extra concern and potentially a drain on time and money, at an already difficult time.”
And as Claire adds: “Tech-savvy businesses already using accounting software will find it easier than others who are not used to accountancy software – such as sole traders in rural areas, who are more likely to use manual means of VAT reporting.”
Fortunately, all of our If You Ask Me contributors this month have lots of advice and tips.
Claire’s include planning ahead, shopping around and exploring all your options – and ultimately: “Speak to people, speak to your accountant (if you’ve got one) and remember that there is a lot of information available.”
What tends to be most scary about change is just that – the fear factor.
Over to Joanne Gilpin, of BHP Chartered Accountants:
“If you think back to when GDPR compliance was all the rage, the thing that focused people’s attention was the penalties that could be potentially handed out to firms.
“MTD is no different in that there are fines. However, for now, there are no plans to punish companies indiscriminately if they are able to show that they are trying to comply.”
She also reminds readers that: “The first year is a ‘soft landing’ period which should give firms time to come to terms with what is required.”
Julie Robinson of Footprints Accountants is also reassuring: “Planning and preparation are key. I’d recommend that you talk to your accountant as soon as possible, if they’ve not already spoken to you.”
She also points out that the first thing you need to do is the ‘turnover test’ to see whether your tax turnover will exceed the MTD and VAT threshold.
Julie also identifies a number of business categories who can opt out of MTD.
But she’s reassuring – to a point!
“Lastly, if you are breathing a sigh of relief because this doesn’t apply to your business, think again!” warns Julie.
“MTD applies to all of us from April 2020, so it is not too early to start planning and utilising the correct software.”
