Written by Trish Summers, Director, CMS
Many of you may have read or heard about MTD – Making Tax Digital. There has certainly been a lot of media coverage surrounding the personal tax return element of this, but did you know that this will also affect businesses, including BIDs, and the way they provide information to HMRC?
HMRC already receives information from employers, banks, building societies and other government agencies and this digital move aims to remove the need for people to provide information HRMC already holds and also provides people with access to their records. It should also assist in reducing the likelihood for mistakes. On their website, HMRC quote an estimated figure of £3.5billion of lost revenue due to mistakes in VAT returns alone and VAT is where they plan to start. There had been plans to make all tax reporting digital by April 2019 but, following consultation, this has now been changed to a staggered implementation, commencing with VAT in April 2019, with other tax set to follow in April 2020 (unless business voluntarily choose to submit information earlier).
So, what does this mean for BIDs? Most are over the VAT threshold and therefore the new rules will apply. Although the frequency of VAT reporting doesn’t look set to change, more information will be required and updates will need to be provided on a quarterly basis to HRMC in digital format via HMRC approved software. In simplistic terms, we’re talking about the information that sits behind the 9 boxes on the VAT return. HMRC are piloting the scheme this year with live piloting starting in Spring 2018.
On their website, Accountancy Age say that 65% of small businesses are going to have to adjust their accounting processes, 23% are using manual records and 16% are still using the shoebox method. Although I hope that no BIDs fall into this last category, there will clearly be some preparation that needs to be done for some BIDs, particularly those still muddling through on spreadsheets.
At CMS we already use appropriate software which will updated to conform with the new reporting requirements and so our managed clients, for whom we provide cashbook support, can be assured that we will take care of this for them, alongside submitting quarterly VAT returns on their behalf. If we don’t currently provide your BID with cashbook support, this is something that you may like to consider. Alternatively you may look to engage or enhance the services you use from your accountant or software supplier.