Pandle Insights: Latest Making Tax Digital Updates and How They Affect Your Clients
Ever since it was announced last July that Making Tax Digital (MTD) would be delayed until 2020, it seems that there haven’t been many updates regarding its progression.
Considering its delay was a consequence of not enough businesses being aware of the initiative, it seems counterproductive that it’s fallen by the wayside rather than being talked about.
However, so far this year there have been two new updates about MTD which affect both small businesses and the self-employed.
Income tax pilot extended
An extension for those who can sign up for MTD’s income tax pilot has been announced, expanding the scope of those who can test out MTD before it’s rolled out nationwide.
You’re now able to sign up if you’re a sole trader with income from a business and/or if you’ve let a UK property (excluding furnished holiday lettings).
Those in the scheme will not be required to submit annual Self Assessment returns and will instead upload quarterly income tax updates to HMRC by using accounting software.
Launched in March of this year, the income tax pilot helps to give users a taste of how MTD will work in the long term, while also helping HMRC see what needs working on before it’s published to the masses.
Those who are part of the pilot scheme will be required to upload their quarterly updates through accounting software recommended by HMRC, of which Pandle is one!
Calls to delay MTD
A new survey has revealed that almost a quarter of UK businesses have never heard of Making Tax Digital.
As a result of this report, created by the British Chambers of Commerce (BCC) and Avalara, the BCC has called for delays to the rollout of MTD to allow for more preparation time.
Only one in 10 of the businesses surveyed said they knew “a lot of details” on the MTD initiative, while the majority of respondents (66%) said they knew only “some details” or only recognised its name.
Of those who were aware of the scheme, 25% said they had made no preparations for the digital switch.
These delays are looking more likely as MTD was listed as one of the 39 projects that could have to be put on hold while the government focuses on Brexit negotiations – a move which could cost HMRC “billions”.
How do these updates affect you and your clients?
As an accountant managing clients who will eventually have to be MTD compliant, there a couple of things you should consider in light of these announcements.
The first is whether any of your clients would benefit from jumping on the income tax pilot scheme now that the entry requirements have been extended.
If you have any clients who are self-employed or have let a UK property (excluding furnished holiday lettings) they will be eligible for the scheme and may benefit from being one of the first to try it.
By suggesting this to your clients at this stage, they’ll be able to familiarise themselves and prepare for when the switchover happens.
This will also help your own accountancy firm get ready for the switch to MTD. There’s currently a lot of mystery around what the process of submitting quarterly updates will actually look like, so by trying out the pilot you can plan ahead and simplify the process in advance.
With regards to the delay that MTD will most likely face, this simply allows you more time to prepare clients. Considering 24% of businesses have never even heard of the scheme, it’s time to change that by updating your website’s sources and answering any queries clients have.
Are you in need of a resource on Making Tax Digital to send to your clients? Check out our comprehensive guide on what MTD is and how it applies to small businesses and freelancers.