SPRING 2019 MAKING TAX DIGITAL MAKING TAX DIGITAL To submit HIT RETURN The governments Making Tax Digital scheme will go live in a few weeks but what will it mean for your business, and what must you do to meet its requirements? Much of what we used to do in person is done online today and now the government wants businesses to record their transactions digitally and upload them to HM Revenue and Customs (HMRCs) system. From 1 April 2019, larger businesses will have to keep digital accounting records and file electronic tax returns. Under the Making Tax Digital scheme (MTD), firms will have to submit key information and data for their VAT return using software compatible with HMRCs system. This is not being provided by the government, so businesses will have to upgrade or buy new software. The aim is to steer the UK away from paper-based book-keeping, and the scheme will apply to all VAT-registered businesses with a taxable turnover (not profit) of 85,000 or more. HMRC says it will not only make it easier for businesses to get their tax right first time, but could also save small businesses money in the long term, by making the VAT returns process more efficient. However, there are some concerns about MTD, including: Awareness. A survey by the Office for Tax Simplification suggests only 25 per cent of the smallest businesses have some awareness of the scheme, compared with 70 per cent of other businesses. HMRC has been urged to step up its communication with them. Business owners may be baffled by the choice of software and, because they are cloud-based accountancy packages, a subscription may be payable Cost. HMRC is not supplying the software needed by firms to make their systems MTD-compatible, and scores of packages are expected to have been developed by April. So business owners may be baffled by the choice and, because they are cloudbased accountancy packages, a subscription may be payable. Cost estimates for this vary widely, from 100 a year to more than 2,000. A review by the FSB in 2017 suggested time spent by the owner and staff in preparing for the change could also cost businesses more than 2,000. RESOURCES FOR BUSINESSES nHMRCs guide to Making Tax Digital nThe FSBs summary guide to MTD nFSB Making Tax Digital seminars across the UK Is everyone digitally ready? UK businesses that cant bank on a decent internet connection and broadband speed may be daunted by the prospect of relying on it to do something as important as their tax. A minority will also not be regular computer users, and there is concern that their needs may be overlooked. Additional burdens at a turbulent time. MTD is coming into force just as the UK is set to leave the European Union, and there is continuing uncertainty about VAT on transactions between the UK and the EU. The scheme will be an extra concern and potentially a drain on time and money at an already difficult time for small businesses. What is the FSBs advice? Businesses that already use QuickBook or Xero will find it easier to adapt to MTD than those who are not used to accountancy software. Credit: Karen Woolley, development manager for FSB Image: iStock / manopjk There have been reports of firms receiving costly quotes from software companies and accountants for help to comply with the scheme, but the FSBs investigations suggest there are cheaper options out there. The main thing is to plan ahead and shop around. For further information, please contact your local Trading Standards Service