This is the final blog in which I present my personal views on the questions in the consultation document MTD: Bringing business tax into the digital age.
This instalment looks at the costs and savings for a business moving into MTD quarterly reporting. This is a key area for tax agents to examine on behalf of their clients. I have summarised the questions and answers below as the detail is not relevant for my business (I am not a tax agent), but it will be for your practice and your clients.
I believe that HMRC does not understand the expected costs of MTD for the average business. If every accountancy practice in the UK responded to these cost-related questions, the answers would add up to a significant sum that even HM Treasury would have to take seriously.
Q 39: Do you believe that there is the opportunity for MTD to create savings for your business?
No. MTD will create costs for many businesses. The use of accounting software is likely to take more time to enter transactions than into a spreadsheet.
Q 40: Do you think there are different business sectors or sizes likely to benefit more from MTD? If so, what would these be?
Software providers and accountants may benefit from MTD.
Q 41: What costs might you expect your business to incur in moving to the new regime?
Cost of subscribing for accounting software; up to £50 per month, plus up to two days learn to use the new software.
Q 42: Do you expect that your business will incur additional on-going costs as a result of these changes?
Double the costs of using an accountant to prepare and submit my company accountants from £600 to £1200 per year. I also expect the quarterly submissions to take an extra hour each quarter.
Q 43: Will particular businesses (e.g. partnerships) experience more difficulty in adapting to the changes? If so, please provide details, including any additional one off costs or ongoing costs.
MTD should be voluntary for all businesses. Those who experience difficulties should be offered free training, but compulsion should not be threatened.
Q 44: If you are an agent, please provide details of how these changes will impact on your own business, including details of any one-off and ongoing costs or savings. How do you perceive that these changes might affect your clients?
I am not a tax agent
The questions above do not take into account the time which will be wasted by accountants trying to sort out tax payments and liabilities for their clients, if the voluntary pay-as-you-go system comes into effect. I will address those issues in a separate blog.
I would urge you to think about the costs to your practice of converting all your clients to digital record keeping, and how much more (or less) each client will have to pay in accountancy fees and software licenses. Perhaps your clients will save money in the long term by using accounting software.
Please report your cost and savings estimates to HMRC at: [email protected] or by completing the HMRC survey which covers the main questions from this consultation document. The consultation period ends at 11.45pm Monday 7th November. Every response counts.