Today at CIMA’s Making Tax Digital Conference, HMRC provided some news and insights around Making Tax Digital, and what we can expect for the 2019 deadline and beyond.
A Digital Journey
HMRC’s ambition, to become “one of the most digitally advanced tax administrations in the world,” requires a modern approach to their 50+ year old platform. Starting with VAT, HMRC is innovating their entire approach to tax filings, and giving their clients the opportunity to innovate.
Filing for Making Tax Digital
Under the new platform, every business entity will have one single record. Whether filing to HMRC or reporting internally on business information, gaining insight is only possible with good, well-organized data. This new phase for tax reporting will not just improve information for HMRC but will give filers a better understanding of their returns.
MTD for VAT is step one towards a new digital world, one which HMRC wants businesses to see as an opportunity. In a few months, it will be mandatory to submit digital VAT returns, prompting firms to think about what other areas of their business could benefit from modernisation.
Response from HMRC clients
When first signed into law in 2017, some firms were not ready to embrace the digital approach. Spreadsheets were the preferred method – a recent poll from Arkk showed that 100% of respondents used Excel for part, if not all, of their tax submissions process. It became clear that spreadsheets would continue to play a vital role in reporting, but with changes to the internal processes firms performed to create the 9-box output.
To show that MTD could work nationwide, HMRC’s pilot utilised several vendors who could support firms with varying levels of complexity. Reports from the pilot are mostly positive, with HMRC clients reporting that in many ways, MTD for VAT has been simpler than they first expected. For firms affected by the October deferral, HMRC recommends taking advantage of the pilot to test your internal processes and software ahead of the deadline.
This morning, HMRC made two recommendations to prepare for Making Tax Digital:
1.Make sure your chosen software is compatible
HMRC have kept a useful list of all vendors supporting Making Tax Digital, and have even segmented them into software in development vs software available now.
2. Examine your internal processes
With the introduction of the “digital link”, this is an opportunity for tax teams to address any inefficiencies and create a modern, streamlined approach to HMRC returns.
It wouldn’t be a finance conference without mentioning Brexit! When asked about VAT returns going forward, HMRC confirmed that for now, the 9-box output would remain the same.
Keep an eye on the Arkk blog for more insights around CIMA’s Making Tax Digital Conference, and if you’ve got questions around MTD, get in touch with our team.