FINANCE


The trials and tribulations of Making Tax Digital


John Griffin (pictured), a Partner at Leicestershire accountancy firm Newby Castleman with 30 years’ experience in the industry, explains why the Making Tax Digital scheme may have hit a bump in the road.


The Government’s ‘Making Tax Digital’ plans were heralded as a “revolutionary simplification of tax collection” by former Chancellor George Osborne, following their announcement in 2015.


Businesses of all sizes would


move their tax accounting online by the summer of 2018, providing quarterly reports to HMRC. Traditional annual tax returns and mounds of paperwork would become a thing of the past. Skip forward two years and the


controversial reforms have been largely pushed back to 2020. Businesses with an annual turnover under £85,000 will no longer have to make the changes at all, following new HMRC guidance in July. Recording tax information


digitally isn’t in itself a bad thing


and it isn’t anything new or ‘revolutionary’. Digital submission of information to HMRC has existed for many years. It’s also definitely not a simplification, unless you’re a big business with complicated accounts. To expect businesses of all sizes, including brand-new enterprises with one or two staff, to keep in-depth financial information updated online throughout the year was never realistic. Even for slightly larger


businesses, to increase the number of times you’re reporting each year from one to four, and to totally change the way you put together those reports, is a big upheaval. The changes to the plans are


welcome but they do not go far enough to offset the negative


impact on small businesses. It’s great that some will no longer be under pressure to make a speedy switch, but it is naïve to set the mark at the VAT threshold of £85,000, as though the circumstances of a firm bringing in £100,000 a year are radically different. Even with these proposed


changes, we’re still going to see businesses like chip shops and takeaways having to keep real-time, digital financial records. Unless they can become very literate in accountancy very quickly, they’re going to need full-time professional advice – either in-house or from an accountancy firm. For me, the turnover mark


should be at least £1m for the foreseeable future. This would relieve more than 15,000


‘The changes to the plans are welcome but they do not go far enough to offset the negative impact on small businesses’


businesses in Leicestershire alone from the undue pressures of trying to push major changes through before an arbitrary deadline. Our industry needs to pick up


the baton and ensure that our smaller and mid-sized clients are well prepared for what is to come. For business owners, a detailed


transition plan is vitally important, and the postponement of the deadline does give them a chance to do that in a measured way.


56 business network October 2017


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