HMRC reduces costs for Making Tax Digital compliance

HMRC has revised down sharply its estimate of the transitional cost to business of implementing its flagship Making Tax Digital initiative to £109 rather than £280 as originally forecast, following the decision to limit the number of businesses required to switch to digital updates and confining the first implementation to VAT reporting only.

The original Making Tax Digital proposals phased in the implementation of digital record keeping and quarterly updating by businesses, the self-employed and landlords for Income Tax Self-Assessment, VAT and Corporation Tax between tax years 2018/19 and 2020/21.

However, following unease over the speed of introduction of the quarterly reporting system and the snap election, the government confirmed in July 2017 that businesses would only to use the Making Tax Digital system for VAT reporting from April 2019.

On 1 December HMRC confirmed that transitional costs may be lower than originally anticipated because a significant majority of businesses with a turnover in excess of the VAT threshold will already have the necessary digital tools to operate Making Tax Digital.

HMRC stated: ‘It should be noted that those now mandated to join Making Tax Digital from April 2019 for their VAT obligations are businesses that are likely to be more digitally ready and capable of making an earlier transition, with the majority already reporting VAT quarterly.

‘Where they have alternative reporting arrangements, these will be maintained. Because a significant proportion of the mandated population already uses software and has less need of new or upgraded hardware to operate Making Tax Digital these transitional costs are lower than previously estimated.’

Making Tax Digital now applies to businesses with turnover above the VAT threshold (currently £85,000). Businesses with turnover below the VAT threshold will not be required to use the system but can choose to do so. Businesses will also be able opt in for other taxes, benefitting from a streamlined, digital experience.

The government has said it will not widen the scope of Making Tax Digital beyond VAT before the system has been shown to work, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread. The changes mean that the smallest businesses and landlords will be able to move to keeping digital records for tax at a pace that is right for them.

 

Get ahead in good time

Although for many companies and individuals these changes have been delayed, it still makes sense to go digital sooner rather than later, saving you time and stress further down the line.

We are working with an increasing number of our clients to put in place digital record-keeping systems through moving to a Cloud based system. As QuickBooks Platinum ProAdvisors we can ensure an efficient transition and provide ongoing advice and training.

Please speak to your Lentells contact for more information on Cloud Accounting, or contact our Cloud Accounting team on 01460 68700 or email  software.support@lentells.co.uk.