Androulla Soteri, tax development manager at our member firm MHA MacIntyre Hudson, says businesses shouldn’t be complacent about the technological change Making Tax Digital (MTD) represents:
“Despite public perception, Making Tax Digital (MTD) has not been dropped. We’re however very much in limbo, and where we go next depends on the outcome of the election.
“MTD was removed from the Finance Bill in order to push the bill swiftly through parliament before the general election. If the current Government returns next month with a solid majority, MTD is likely to be inserted into an early-summer Finance Bill. If they return in a weaker state, MTD is likely to proceed, but on a slower track and not necessarily in the way it’s set out now.
“If there’s a change in Government, or a coalition, MTD could undergo significant changes. The Labour leader has expressly vowed to scrap the burden of quarterly reporting for small businesses with a turnover under £85,000. The Liberal Democrat’s position is less clear. While they don’t appear to have made any express opinions, they have inferred support for the Association of Accounting Technician’s (AAT’s) suggestion that the exemption should be in line with the personal allowance, and that the process should be phased in over a period of three years on the basis of turnover thresholds. UKIP have remained silent.
Dealing with the Inevitable
“So where does this leave tax payers and agents? The reality is that digitalisation will eventually come in, regardless of which Government we have. Therefore, there’s an argument for dealing with the inevitable sooner rather than later.
“That said, the way technology is impacting businesses more broadly means that the need for technological advancement could overtake the speed at which MTD will be implemented.
“Management accounts were traditionally the preserve of larger businesses. However, the increasingly entrepreneurial and competitive environment has created a need for businesses of all sizes to have more frequently updated financial information. If a company doesn’t strike on opportunities while the iron is hot, they miss out. The ability to move quickly very often depends on the financial position of the business, but looking at the prior year’s accounts doesn’t necessarily shed light on the current position.
“Data analytics software is now capable of producing things like cash flow forecasts in a matter of minutes, at the click of a button, provided up to date financial information is readily available. Businesses need to ensure they are not being left behind by this. It takes the concept of technological obsolescence to another level.”
If you have any questions or would like to talk to use about Making Tax Digital in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.
This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.