Making Tax Digital Update

Many Accountancy practices have been working hard to increase their clients’ awareness and understanding of the impact of HMRC’s plans around Making Tax Digital. Through the links we have with the South Wales Chamber we facilitated a meeting in Cardiff with the HMRC Chair Edward Troup (please see our earlier article) to ensure we were able, as VAT advisers specifically, to air our concerns around the plans for VAT data reporting.

It was no surprise that other Chamber members at that meeting echoed concerns over the lack of information available for businesses on the ground to understand what it was they had to plan for. With the pressure of a truncated Finance Bill, a General Election and adverse comment from the Public Finance committee on HMRC’s overall performance, there was little surprise to find revised plans have resurfaced in this new parliamentary period on the Making Tax Digital roll out.

The programme remains and VAT will be leading the process with implementation from April 2019 which, it should be noted, is the same time for our departure from the European Union.

HMRC have other digital infrastructure challenges outside of the Making Tax Digital (MTD) plans. They are still in the process of undertaking the already (pre Brexit) planned upgrade in the CHIEF systems which handles all Customs, Import, Export and Freight declarations. These upgrades were to improve capacity handling from 50m declarations to a planned 100m declarations without the regular interruptions that importers and exporters currently experience. Exiting the Single Market could take demand for processing to 350m filings so further capacity is already required from this new system.

A period of challenge in terms of managing new IT platforms already exists therefore for HMRC. In terms of the VAT reporting issues around MTD much remains to be resolved.

The fact that a business may use spreadsheets to record its VAT information will not address the MTD agenda and software will be needed to interact directly with HMRC when VAT information is submitted. Development of compatible software is still underway and we understand that it will be April 2018 before public trials will start.

However, VAT reporting is not always a straight forward matter due to the range of adjustments that an organisation may need to make – perhaps their partial exemption calculation each quarter or the annual adjustment or a Capital Goods scheme adjustment – little information is available on mechanisms for dealing with these aspects.

A useful issues update has been put together by the Chartered Institute of Tax and you can access this HERE

Planning remains the key message from Centurion and keeping up to date with the plans as they evolve. Mapping how VAT data is recorded in accounting systems and the controls and procedures you have in place to ensure its accuracy and compliance is a great place to start.