ATT: Govt must act on treasury report on Making Tax Digital

Tuesday 24 January 2017

The new Making Tax Digital (MTD) plans have received mixed views from companies and government figures, with many officials concerned over how the proposals will be put into practice. 

They would make a significant change to how businesses interact with HMRC, calling on all companies (bar some exceptions) to keep their accounting records in a prescribed digital format and send in quarterly updates. 

Following this, an end of year reconciliation will take place to guarantee a full year of activities are properly recorded for tax. It has been suggested that companies should start this way of recording for income tax and National Insurance from April 1st 2018 or April 1st 2019, with the date depending on their size. 

The same process will be put in place for VAT from April 2019, with between two and a half million and five million businesses expected to be impacted by the move. 

The government consulted its plans over the summer and autumn of 2016 and is expected to respond to the proposals later this month (January 2017). Based on the evidence heard, the treasury committee supports the concept of digital tax, though its benefits have yet to be properly proven. 

What’s more, the committee is concerned about the costs to businesses of introducing MTD, along with the expenses associated in maintaining digital records and submitting updates. 

The Association of Taxation Technicians (ATT) has also warned of the dangers that businesses and the tax take if the government ignores the findings of the Treasury’s report on MTD. 

The chair of ATT’s Technical Steering Group Yvette Nunn said: “The treasury committee’s report on Making Tax Digital rightly identifies that if the changes are insufficiently considered or introduced too hastily, much of the perceived benefit to the Exchequer from the programme could be squandered. 

“Smaller businesses could cease to trade or move into the hidden economy.”

Ms Nunn went on to say that the mandatory imposition of an unfamiliar and expensive system could reduce good business keeping rather than encourage it. 

She added that she was pleased the report covered the importance of cyber security in relation to hardware and software, as companies would need to use these to produce digital records. 

Ms Nunn concluded that the report offers the government and HMRC a great opportunity to look at how proposals can be amended to achieve a win-win outcome with MTD. 

Considering the potential future changes of MTD, it could be wise for businesses to use freelance accountants to ensure they do not fall foul of the law, 

By Victoria McDonnell

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