Latest MTD progress
Newsletter issue - February 2018.
Draft regulations, together with a draft explanatory memorandum and a draft VAT Notice, covering required changes to the VAT regime under the Making Tax Digital (MTD) project were published for consultation in December 2017. The consultation runs until 9 February 2018, and it is expected that live pilot testing will then begin in spring 2018.
With this in mind, the Association of Taxation Technicians (ATT) has recently been urging software houses and HMRC to identify MTD-compliant software packages urgently to allow businesses to make an informed decision on which to use and help to avoid the need to make a troublesome mid-accounting period change.
Some businesses will need to have MTD complaint software in place in just five months' time.
Under MTD, businesses above the VAT threshold will be required to keep their records digitally and provide HMRC with quarterly VAT updates from the beginning of their first VAT quarter starting on or after 1 April 2019.
Quarterly updates will have to be submitted to HMRC from software via an Application Programme Interface (API). It is therefore important for such businesses to make sure that they have an accounting package which can do this and, if not, ensure they do in good time for their first quarterly VAT update under MTD.
Commenting on the implementation timetable, Co-chair of ATT's Technical Steering Group said:
"The first businesses to come into MTD will be those with a VAT quarter running from 1 April to 30 June 2019. If they happen to have a 30 June year end, they will need to have an MTD-compliant accounts package in place by 1 July 2018 or risk changing their accounting package mid-year. This gives them only five months to select and integrate a new package if their current one would not be MTD compliant.
It would be a major headache for businesses, from a practical perspective, to have to change mid-accounting period, as when they come to do their accounts or tax return, the information would be spread over two systems. It would also make it difficult to get an in year view of profitability.
HMRC will be providing an online tool to help businesses identify which software packages will meet their MTD needs but until that is available it will be very difficult for businesses and the agents advising them to make an informed decision.
The ideal solution would be for the MTD for VAT start date to be altered so that it applied from a business's first accounting period (and not VAT quarter) starting on or after 1 April 2019."
Whilst we wait for the detail of the MTD implementation process to evolve, businesses should be able to gain some comfort in the Government's confirmation that it will not widen the scope of MTD beyond VAT before the system has been shown to work. This means that businesses can focus on this one area for now.