The first Blog from the Dog!
I’m Lyra the office dog, part of the team at Rowdens Chartered Accountants.
In the business world, there is a saying “Don’t let the tax tail wag the dog” and at Rowdens, we take this very seriously. As the office dog and the only one in the office with a tail, I’ve decided to blog about the issues that I hear day in day out that affect our clients.
My job is to let you know about the issues I think will be of interest and of course, have a bit of fun, chase a ball, stop you going down rabbit holes or digging massive holes for yourself and maybe help you pick up a few treats along the way!
The MTD Great Dane
For this first blog, let’s get the elephant (or should I say Great Dane) out of the room now.
No, it isn’t Brexit although the initial timeframe is about the same. It’s MTD or Making Tax Digital (if you want to go all Government about it). For most of our clients it really isn’t an issue at the moment but as people are talking about it, I thought I’d give you a few pointers and explain why most of our clients don’t need to worry for the next couple of years at least.
The key bone factor: MTD starts in April 2019. But who does this apply to?
That heading is a bit of a mouthful but pretty key really. For a start, this initial phase is only going to affect businesses with a turnover of over the VAT threshold of £85,000 who file VAT returns.
If that applies to you, then in order to file your VAT returns with effect from 1 April 2019 (that is only next year, so keep reading!), you will need to keep your records digitally and file your VAT returns through HMRC MTD compliant software.
MTD compliant software
Now I gather that the key words here are MTD compliant software. Unless you are on MTD compliant digital software like Xero as most of our clients are, then even if you are happily filing your VAT returns through your software, this does NOT mean you will definitely be able to continue to do so after 1 April next year.
Don’t bury your head in the sand over this as you may end up in a very large hole and there won’t be a nice bone at the bottom! Do check with your software provider as to the situation and what it is going to cost you if you have to purchase additional bridging software to be MTD compliant.
Happy days: You are fine if you are on Xero and we can help you if you aren’t
The good news is that if you are on Xero, you don’t have to worry. Just keep on doing what you are doing. The Xero guys tell us they have it covered so check out their Making Tax Digital page.
However, even if you aren’t using MTD compliant software, there is still time for the team at Rowdens to quickly and efficiently transfer your bookkeeping and accounts onto Xero (they’re Xero Gold Partners by the way) and even seamlessly bring in at least a couple of years of your old data if you are on Sage or QuickBooks. (I’ve seen them do it loads of times and, without exception, our clients love being on Xero and wouldn’t go back even if I offered them my very best bone).
Even without all the MTD stuff, there are loads of advantages to being on Xero:
- It cuts out half the boring bookkeeping time
- You can use cool add ons like Receipt Bank to read your receipts and post them in Xero
- You can see what’s happening with your business financials from anywhere, even from your basket at home
…but I’ll save all that for another time.
An MTD shaggy dog story – WTF!
Talking of acronyms, I must tell you this story. I was busily investigating the contents of someone’s waste paper basket when the phone rang. It was someone from our Institute, ICAEW, doing a survey on MTD. Apparently, they asked what we thought of the HMRC MTD initiative.
Jonathan (the larger of the two directors who really knows his stuff when it comes to tax) answered the call and said “In a word, WTF!” Well, as you can imagine, I really pricked up my ears at that because I thought he must mean something to do with food. I think the person on the other end thought so too because they gasped and said “Did you say what I think you said?” Jonathan said “interpret it how you wish but I was thinking What’s That For?” What a porky, I know he meant food!!
The HMRC digital Pie in the Sky?
However, it seems that HMRC want to become “one of the most digitally advanced tax administrations in the world” and MTD is just a part of this.
I don’t want to bore you with too much detail but essentially the plan is to give all taxpayers one digital account on the HMRC website where you and your agent (like us), will be able to see all your tax affairs in one place.
It will be pre-populated with any tax information that HMRC get from other sources like pension, bank interest, employment stuff etc. to save you having to send it in again. This account will interact digitally with your business software etc. to save further duplication.
Eventually, the Government wants to do away with annual tax returns and collect information about tax (and get paid) several times a year. HMRC thinks this will help everyone keep on top of their taxes and have an up to date picture of their financial affairs as close to real-time as possible. Sounds a bit like having your accounts on Xero really! Apparently, they reckon that there is a cost to the Exchequer of over £8billion a year due to avoidable taxpayer mistakes!
Bow Wow, that definitely isn’t like having your accounts on Xero or having an accountant like us to help you through the barbed wire of the UK tax legislation with year round advice. It must be so stressful to be in that kind of a pickle.
When will other taxpayers be affected?
People keep asking this and the truth is, we don’t know! The Government had hoped to have it all in place by April 2020 but this is on hold for now.
What we do know is that once MTD for VAT has been implemented, MTD for the self employed and those with income from property and corporation tax are expected to follow but not before April 2020 at the earliest.
HMRC is also running an MTD for individuals transformation project so the answer is “watch this space”. I will update you as soon as any titbits are released!
In the meantime, I think it’s time to have a break from the office and go for a walk so I’ll sign off for now.
Thank you for reading!