Accounting expert Ian Fletcher tells us why accountants need to prepare now for Making Tax Digital.
In 2015, the government announced plans for a digital tax system that would change the process of “doing a tax return” forever. This change is known as Making Tax Digital or Digital Tax and businesses registered for VAT will start using this process from April 2019.
What effect will Digital Tax have on accountants?
It’s massive. The whole tax system is changing. In time MTD will mean the end of the annual tax return for most tax payers with all information being filed digitally. For accountants it represents a new way of doing things and a complete change from their usual way of dealing with both clients and HMRC.
These changes don’t come into play until 2019 – when should accountants start preparing?
Accountants need to start acting now. They should educate their teams and make a plan to inform clients and convert them from spreadsheets (or pen and paper) to a digitally compliant cloud-based accounting system.
Accountants will need to make fast changes to their businesses. They’ll need to evaluate their client base to work out which clients are exempt, identify any that will need specific assistance and understand what’s proposed so they can plan for the changes.
What happens if accountancy practices don't comply with MTD?
They will go out of business! Or at best they’ll be left dealing with exempt businesses only. HMRC will impose penalties for non-compliant individuals and businesses. If your accountant doesn’t file your accounting and tax information digitally you’ll be penalised. So if accountants refuse, people will either switch or do it themselves. Firms that are clued up and can offer a fully compliant digital filing service will start picking up clients from accountants who lag behind.
What is first thing accountants need to do to get ready for Digital Tax?
The key thing accountants must do is educate themselves and their team on the what HMRC are proposing and then decide if their clients existing accounting and tax software is digitally tax compliant. If it’s not, they’ll need to make changes.
Where can accountants find out more?
QuickBooks has put together a Making Tax Digital marketing kit to help accountants discuss MTD with their clients and move them to the cloud. And you’ll find the latest news on MTD for VAT on HMRC’s website.