Tax specialist Rebecca Benneyworth MBE talks about ‘what now’ for accountants steering clients down a new digital road
Fresh back from lecturing hill farmers in the North East on how to manage their response to the HMRC’s flagship Making Tax Digital programme, which has now been live for one month, tax specialist Rebecca Benneyworth MBE said it should not be cause for rush or panic, but viewed simply as another step along the road to converting companies - and indeed practices - to the benefits of digital tax reporting.
“The programme – as everyone knows – is designed to streamline tax administration and requires 1.2m VAT registered businesses earning over £85,000 to keep records digitally and submit online VAT returns.
“Latest figures from HMRC show that more than 100,000 signed up by the start date with thousands of businesses joining every day and they continue to urge business – if they have not done so already - to begin preparing for the switchover.
“I am saying three things to accountants at the moment. Be aware of new rules relating to sign ups, and in particular when is the best time to sign up for each particular business , look for simple ways of getting clients to comply, and think about the opportunity digitisation actually provides the accountancy profession to get business better organised in essential financial data collection and reporting.
“Compliance often over-shadows the benefit message and we will eventually start to see how digitisation of record-keeping will allow the accountancy profession to be less about data collection and more about management strategy to build better, stronger businesses. I am seeing it in my own practice and that is benefiting me and my clients.”
Timing of sign ups
“While April 1st was the go live day nobody needs to be rushing about. We will still be signing clients up for a few months yet, but sign-ups will need to wait now until after the last non-MTD return is in and payment has been made on it. Businesses with a March VAT quarter end should wait until around 18th May so that their last payments under the old regime have been made and fully processed. They then have around two clear months to sign up to the new MTD regime before their first mandatory return under the new system is required.
“For companies whose last VAT quarter was the end of February, their May quarter end return is not mandated under MTD, so that will also have to run its course before switching. So the message is don’t rush out to do things, just take stock and be prepared to wait until the time is right.
Making it easy to get clients over the line
“This is about helping businesses – mainly those still using manual records – to achieve MTD and reassuring them that it can be done, fairly cheaply, with all the necessary details provided. I do think of it as being a bit like sitting an exam where you know the pass rate is 50%, so 51% will do just fine! Any effort to get to 95% at this stage for these companies is a total waste of effort.
“When moving manual records onto digital spreadsheets, there is a requirement for three data items for sales and three for purchases. For sales data you need date, value and rate of VAT and for purchases you need date, value and VAT to be recovered. HMRC is continually updating its information and advice – see VAT Notice 700/22 - and there are due to be more updates soon. Keep an eye on it.
Getting a grip on financial data
“Making Tax Digital is a great opportunity for accountants to lead Businesses in general into better attitudes of gathering and recording important financial data. For too long accountants have accepted whatever clients have thrown at them. How many times have you had to wade through the drudgery of bits of paper in December? Now – by law – we can say it’s just not good enough. That is a good thing.
“From a Practise point of view I took the plunge into going fully digital this year, taking all my clients with me and it has totally transformed my business. I am now seeing end of year accounts submitted within a couple of months and spending much more time talking with clients about financing ambitions for the future, which is far better use of my expertise – and a lot more interesting.”