On the last day of January 2017, HMRC published its response to their 2016 consultation on Making Tax Digital (MTD).
Two aspects stand out for attention:
- The commencement date for the self-employed is still April 2018, and
- Although HMRC acknowledge the £10,000 de minimis income limit had received considerable comment from respondents, this amount still stands. If it is reduced, we will not know the revised figure until the publication of the March budget.
On the upside, HMRC have agreed to simple three-line data uploads for smaller concerns; sales/income, costs and net profit.
It does seem, therefore, that MTD will duly be enacted in the Finance Bill 2017 for implementation on a staged basis from April 2018.
The implications for compliance services are considerable. The end of self-assessment tax returns. Potentially, the upload and review of accounting data on up to five occasions in each reporting period (four data uploads and an annual review).
The main challenge for firms will be to enrol clients in taking new compliance services to meet these new demands – no mean feat in today’s competitive market. However, this is not a challenge to duck. MTD and the increasing use of online personal tax accounts will draw in less qualified firms, who will jump at the chance of extending their basic “bookkeeping” services. And don’t forget, that part of MTD requires the adjustment of trading results for disallowable deduction, capital allowances and losses – territory usually the preserve of tax practitioners.
The first step must be to encourage businesses to keep their accounting records using proven online software solutions. For example, practices that already promote Xero or similar software, will be well placed to deal with MTD as a natural extension of their activities for clients.