Both Making Tax Digital (MTD) and Brexit have created ripples in the country and have affected many industries. While the responses to Brexit were mostly on the negative side, the responses to the announcement of the implementation of MTD had quite mixed reviews. People have been wondering what the digitalisation of the taxation system may mean for them, and the vote to leave the EU has caused some delays in the progress of various developments, including that of MTD.
But is something for you to worry about?
Pre-Brexit, many industry experts had voiced their opinion about the terrible consequences that the country would have to face. However, post-Brexit, we can see that although there have been some setbacks, the economy of the country did not hit rock bottom, as was predicted and feared. As Telegraph reported:
“There has been no financial crisis, no clamming up of credit markets, no chaos... the prophets of doom have so far been confounded.”
Taking this evidence under scrutiny, we can safely assume that although the implementation of MTD may be delayed, it is unlikely that its implementation will be halted completely.
For Businesses and Accountants, Is This Good News?
Considering that most of our clients had voiced their unease over the implementation of MTD, we can say that this is good news. The delay in the implementation of MTD would give both businesses and accountants the time they need to understand the implications of the digitalisation and upgrade to make sure that they are not left behind.
In a survey, people who were asked to give their views about Making Tax Digital, most of them responded that they did not have sufficient information to comment on that. Now that there is time for MTD to be implemented, more data could be provided to the businesses and accountants so that they would be properly acquainted with the processes.
How Will the Implementation of MTD Affect Your Business/ Practice?
If you are thinking about the impact of MTD after it has been fully implemented, here are the things that you must know:
- The tax submissions to the HMRC will be quarterly, and all mandatory records for landlords and businesses will be digitalised. Any new start-up will have to make a first return within 4 months
- Each business will have a digital tax account that they would use for making the quarterly update. A month’s time would be allowed to make the update
- The digital records could be ‘intelligent’ digital accounting software
- The digital records could be stand-alone or cloud-based
- Small businesses will be pushed towards cash accounting
- The cash accounting for landlords would be different, with new rules for interest restrictions, revenue and capital division etc.
- Depending on forecast tax liability in the digital tax account of the business, there will be an option of a voluntary ‘pay as you go’
- The penalty system will be points-based, which will be applicable on all late returns of Corporation and Income Tax, and VAT
- The third party income data that comes from employers, banks and potentially DWP would be incorporated into digital tax accounts, and any discrepancies need to be challenged with the third party.
The implementation of MTD can be slowed down due to the economic ripples caused by Brexit, but rest assured, it will be implemented. The delay can give time to accountants and business firms to get familiar with the details of Making Tax Digital. Nevertheless, with implementation of MTD would require the skills of professional who can handle the complex new taxation process.