In the last newsletter we gave some information regarding MTD and how this was likely to affect all our clients.
With regard to business clients, it was thought that as from April 2018 they would be required to start filing quarterly returns with regard to their income, including those who had rental property income. Last week however, the Government announced that the roll out of MTD for Business was to be amended to ensure businesses have plenty of time to adapt to the changes. Businesses will not now be mandated to use the Making Tax Digital for Business system until April 2019 and then only to meet their VAT obligations. This will apply to businesses who have a turnover above the VAT threshold – the smallest businesses will not be required to use the system, although they can choose to do so voluntarily.
Although this is somewhat of a reprieve, there is no doubt that the Government is still committed to MTD. Our business clients should still prepare themselves to file financial information on a quarterly basis, rather than just once per year. This will be familiar to those clients who are VAT registered -but it should be noted that the scale of the quarterly reporting is likely to be somewhat different. It is not yet certain how much flexibility there will be to estimates submitted and set out in the quarterly returns which are then confirmed or changed when the end of year accounts are produced. If the rules on those estimates are quite lax then the extra work involved will be quite modest for anyone using compliant software. However at the other extreme, if every return needs to be as accurate as a current set of accounts the work will be much more significant.
Gary Eves said “We think that Making Tax Digital (MTD) is the biggest change in the profession for many years. We are very well equipped to help clients with this as we have been using Cloud based software for 14 years – longer than any other firm”
As a firm we have made a decision that for all new businesses which become clients of websters, we will only be able to take them on if they adopt some form of electronic means to keep their business records. We believe that using accounting software can make it easier to get record keeping in order, particularly for those clients with no expertise in bookkeeping. We will therefore provide online accounting services to all clients– either by providing training on how it should be done and reviewing the quarterly records or by providing members of our accounting team to help them enter the data. HMRC have predicted that the changes (on average) will cost £513 per person in additional accounting costs in the first year MTD is fully operational, but lead to savings in future years, as using software helps reduce the cost of accounting.