MTD: Where do we stand?

It was back in December 2015 that HMRC released the intentions for their new mandate, Making Tax Digital (MTD). The initiative set out to create one of the most advanced digital tax systems in the world. that increases the efficiency and accuracy of the process.

HMRC recognised that the efficiency and accuracy of the current system needed improving with the UK currently losing around £9 billion in avoidable mistakes each year. With VAT accounting for approximately a third of that. The UK’s switch to digital tax returns is representative of a wider trend across the globe that sees more and more nations adopting digital technology.

However, for the UK, the only mandate that is set in place for MTD, is VAT returns in April 2019. The implementation of MTD for other tax returns has been postponed until 2020 at the earliest. The postponement came as a response to the concerns expressed by businesses about the size and speed of the changes they were being forced to make.

After the government acknowledged their initial proposal was a little too ambitious, the updated mandate still seems to be slow in gathering pace. While it is very hard to gather an exact figure for how many accountants and businesses are ready for MTD, there is a consensus that the number is much lower than it should be.  

With the mandate being just seven months away, the task of getting all UK businesses ready for MTD is starting to attract attention. This week saw HMRC release more information to teach businesses of the changes to their responsibilities that MTD will bring.

HMRC’s updated release in July answered questions surrounding the requirements of HMRC and the regulations surrounding internal processes, namely what is meant by “digital link.” While there is still some uncertainty surrounding what MTD will mean in the future and the necessity for a durable long-term plan.

While there is still a long way to go, we must remember the long-term benefits that MTD will bring:

Infrastructure: The government has pledged one billion pounds to improve the broadband connections across the country. MTD has no doubt contributed to the government initiative as the UK currently sits in the bottom third of Europe and below Madagascar for broadband speeds.

Increased efficiency: The time-consuming strains that admin places on your firm will be relieved by new software. Integrated cloud software automatically synchronizes across the different modules so you only need to input data once.

This increased efficiency will also create more time for accountants to complete advisory services as their processes are improved and have access to real time data.

More accurate data: Cloud accounting software will reduce the chance of errors an accountant can make when they are transferring data across different systems. The digital link requirement in MTD will mean that software solutions will generate more accurate data as well as being more efficient.

Economic sense: Although there will be an initial outlay in implementing a plan that is MTD-compliant, there are undoubtable long term benefits. While the reasons above are clear, the savings made by HMRC will be substantial. If a switch in processes is all that is required to save the Exchequer £9 billion a year, then we think that is a justifiable reason for the mandate.

Nomisma offer complete cloud accounting software for small practices and sole practitioners. We provide bookkeeping, self-assessment, payroll, final accounts, company secretarial and practice management in one comprehensive solution. Nomisma offer a free trial to all interested agents to test our software before joining us in a contract. To learn more about Nomisma’s software, visit our website.