Making Tax Digital as at 01.02.18

At a meeting at the Harrow Branch of the Chartered Institute of Taxation with Michael Cameron, who was Her Majesty’s Revenue & Customs (HMRC) representative, it was revealed what appeared to be a huge climb-down.

Instead of, as previously thought, each and every financial transaction had to be reported, only a summary of transactions was going to be needed.

When pressed, Mr Cameron revealed that for:

VAT (Value Added Tax) – it was a repeat (my word) of the VAT Return. Why?

Self-Employment – it would be replica of what was entered in the Self-Assessment Tax Return. That would indicate 4 reports to HMRC per annum, instead of one.

Following the “purdah” (silence) imposed upon Civil Servants while the Brexit Referendum (23 June 2016) and the General Election (8 June 2017), Clause 62 of the Finance Bill 2017 got the ball rolling. The timetable currently is:

1st April 2018 – a campaign of a VAT Pilot is launched to raise awareness of a business’ “mandation obligations for VAT businesses”. HMRC would like an uptake of 37,000 volunteers to test/try this. A contact e-mail address is:

MakingTaxDigital.MailBox@hmrc.GSI.gov.UK

1st April 2019 – those VAT registered businesses were to be mandated. Business records had to be kept digitally. It had to be compatible with HMRC’s systems. However, if a VAT Return spanned 1st April 2019, that return would not be included in this. Instead it would be the next quarter, when the business had to file. It is observed that once a VAT Return had been filed with HMRC, why cannot HMRC use that information in its Digital section?

Other businesses could, voluntarily, enter into the scheme. When asked, it was revealed that to date there were “probably below 100” of these (including “agents” [accountants] who had subscribed.

1st April 2020 – all other businesses would have to comply.

How will it work? HMRC has relented from its initial stance of not accepting spreadsheets, to accepting them. HMRC are aware that some software houses do not calculate VAT properly (example: Partial Exemption, non-business use), and so a spreadsheet using the accounting software to the VAT Return would be acceptable. However, the basic point is that “what was the prime entry? Was it digital or was it inputted manually?” The latter means that there would be scope for “human error” which a digital system was supposed to cater for.

Action required as from 1st April 2018 would be that clients, self-employed, corporations, need to look at their record keeping, and liaise with their advisors [accountants], to see if they can comply with the Digital Age, which is an inevitable occasion.