You may have heard or seen stories relating to some major changes that have been proposed by the government and H M Revenue and Customs.

So what is MTD?

It is a bold and innovative initiative to bring the UK tax system up to date for the new digital age, or so ‘they’ say. They also state:-

• ALL taxpayers will be presented with a digital tax account which you will have access to 24/7, providing you with a complete picture of your overall tax position at any time.
• HMRC will collect and ‘digitally’ collate all information in an as close to real time way as possible to help you keep your affairs up to date.
• You will no longer have to wait until the end of the year to see tax your tax position.

In order to do this they are going to impose a responsibility on businesses/self-employed and taxpayers in general the filing of quarterly returns of income and expenditure, arriving at a profit on a QUARTERLY basis. Followed by an annual return, much the same as we do currently. In other words there will be an additional 4 returns to be filed during the year, filed within strict time limits, with the usual threats of financial penalties if you don’t.

You will be required, or we will on your behalf, to keep contemporaneously balanced books of account in a digital format. There are many software houses offering solutions to this. In our opinion expensive and out of range for the majority of small businesses, also with a risk of erroneous data being passed to HMRC.

HMRC has relented and agreed that proper spreadsheets will be allowed, we are working on suitable formats now.

HMRC helpfully suggests that this is going to cost every taxpayer ‘about’ an additional £125-£150 per quarter on top of their existing fees.

My personal opinion is that HMRC is seeking out smarter ways to establish whether raising an investigation would be worthwhile or not. So for me it is imperative that we make sure that the quarterly returns are as accurate as possible.

The implementation of this will be as follows:-

• April 2018 All limited company’s and any businesses with a turnover of £85,000 or higher
• April 2019 All businesses and tax payers with a turnover of £10,000 or higher.

Our tax software supplier has worked very hard at creating a solution that will accept data in CSV format (spreadsheet), so we are planning on asking our clients to keep rudimentary data on a spreadsheet, and we will be able to work on these monthly to check/reconcile and raise queries. Then we will be ready to file quarterly. We have been assured that the additional cost of our software will be negligible when divided amongst our client, so it is likely there won’t be additional costs there. However, we will have to establish the cost of the additional time required to complete this for you.

As things become clearer we will be looking at the resources required to ensure that you are kept up to date and compliant. Therefore we believe, with your co-operation, we will be able to keep additional charges below those estimated by HMRC. I will be keeping this under constant review.
We have a little time in hand to get ourselves organised for this, but let’s use the time wisely and make sure we understand the changes required and exactly what we need to do.

If we are preparing work for you in the near future, I would recommend that you contact us fairly soon to discuss this and we can make a plan.