4 things HMRC says you must do for Making Tax Digital

The architect of HMRC’s Making Tax Digital (MTD) initiative is under no illusions that the transformation is a challenge.

But Oliver Fisher also told delegates at the Annual Conference that MTD will happen on time, starting  next April. And it will be beneficial.

Two sides to the MTD coin

Fisher, Deputy Director – Making Tax Digital (Business) Strategic Design & Policy, says there are two ‘sides’ to the coin with MTD. ‘One side is the ability to reduce the amount of tax lost each year. The other is that we are trying to nudge and cajole businesses into doing things digitally. It is about the benefit your clients could achieve from being more digital.’

Fisher shared a story of a south coast accountant to illustrate his meaning. A small practice where 50% of clients could be transitioned to digital, and 50% that would be more challenging.

‘One client they had to work with was a hairdresser who wrote up the books over a glass of wine every Friday night.

‘Over six to twelve months they got her to try a software package. She not only got her Friday evenings back, she was able to understand in much more detail her relationship with her suppliers. She could also understand [that] one of her stylist was underperforming.’

Digital services ‘give you the opportunity to encourage your clients to improve their businesses.’

MTDfb will happen on time

Fisher is ‘absolutely confident of hitting the April 2019 deadline’ for VAT.

‘The deadline for VAT has always been with us for three years. We are building iteratively, testing and adapting. So we know the systems work.’

He adds that despite the decision to delay services last year, they were still ready. ‘We were ready for April 18. That should give others confidence we can deliver to the dates set.’

Software systems – work in progress

Agents still await for a list of compliant software available to use. However Fisher says it is getting close.

‘We have over 100 companies actively engaged in developing products. 40 of those are close to being market ready. A cohort of those we are testing already.

‘We are getting VAT returns using compliant software. We are looking now to grow that, both in number of products and the complexity of the businesses.’

Help and publicity campaigns planned

HMRC intends to run an advertising campaign to raise awareness among clients of the move to digital. This was seen as crucial by some conference delegates, who anticipated agents would have to charge extra fees for supporting clients through transition – a burden they felt they were being left to explain to customers themselves.

However, some help was forthcoming. Fisher revealed that the HMRC has ‘a soft landing period in mind’ during the first 12 months. ‘We understand that it may take a penalty notice landing to focus some businesses’ minds,’ said Fisher.

Jump on board early

From the end of this year, HMRC will have large numbers of extra staff on hand to support transition. ‘My advice to you is strike early. Get involved now and get the most support. Over time, help will be stretched more thinly.’

Fisher also advised agents to apply early on behalf of clients who would need exemptions from digital VAT returns. Around 1% of the base is currently exempt, and will retain access to the current VAT return portal. Others who will need new exemptions – perhaps due to their age or because of connectivity problems – will be handled on a ‘case by case basis’, so the advice is to apply early.

Public notice on VAT coming soon

A public notice on VAT is schedule for this summer, which Fisher tips as a must-read document. ‘It will detail the iterative journey’ for the VAT scheme.

‘I would encourage agents to set up an agent services account, even just to dip a toe in the water. If your clients are above the VAT threshold this is absolutely necessary. With income tax on the way at some point too, the sooner you can encourage your clients to use software, particularly software compatible with your own systems the better.’

David Nunn is a former Content Manager at AAT.