Making Tax Digital – The Start of HMRC’s Digital Journey
Arkk Solutions’ clients joined HMRC’s MTD experts for a briefing on the new requirements
Starting from April 2019, firms will need to adopt a digital approach to filing their VAT returns. This forms part of HMRC’s mission, to make tax “more effective, more efficient, and simpler for taxpayers” by 2020 (Making Tax Digital for Business, HMRC, 2017).
For Arkk Solutions, Making Tax Digital takes us back to our roots in iXBRL. In fact, we’ve been working with the same team since 2009 to get ready for the new MTD requirements. We found that HMRC were concerned with the lack of movement around Making Tax Digital, especially with large businesses and multi-entity firms who will have the most changes to make before the first deadline.
As we support many FTSE 100 companies and other clients matching this profile, we invited HMRC to a round table event to tell us more. Here we heard firsthand how they should prepare for the digital transition, and following this session, we have a few pieces of advice to share.
What exactly is “Making Tax Digital”?
If you’re reading this it’s likely some of the first research you’re doing into MTD – and you’re not alone. Of our clients, 50% had never heard of this before, and 16% had only just begun to think about it. We’ve got a number of seminars and events on the horizon to make sure you’re prepared for the first deadline, so make sure you’ve signed up to our alerts.
Looking ahead – daily reporting?
Of those getting ahead of the curve, some expressed concerns around whether or not HMRC will be adopting the models seen in Norway and Spain, where digital reporting to their local tax authority is a daily, not quarterly, requirement. So far, it looks like this is not on the HMRC roadmap (as of February 2018).
Partially Exempt – take action
Of those progressing with MTD, some are starting to assemble project teams. This is especially vital if your firm is partly exempt. HMRC were keen to emphasize that if your business activity includes submitting vat exception requests to HMRC, then getting involved with Making Tax Digital sooner rather than later should be a major priority.
The Future –automation, reliability, streamlining
As part of the HMRC digital journey, Making Tax Digital will cover more than simply clicking a button to create a VAT return. MTD will see a variety of HMRC tax activities modernized, and could impact iXBRL filings in 2020.
In the more immediate future, this initiative looks set to reduce the manual pain around aligning transactions with their VAT codes, and the reliability around obtaining these figures through manual analysis.
Following the seminar, HMRC reached out to a few of our clients for a more in-depth discussion around their existing process. Most expressed their view that going digital could streamline a lot of their manual processes today. Something as simple as receiving a VAT query from HMRC, say, could take them several days or even a week to produce the corresponding data. Under Making Tax Digital, firms can get to a place where they can push a button and see all the information they need.
If you missed our last briefing, don’t worry – we’re bringing you plenty more updates around Making Tax Digital this year. Sign up here, and we’ll let you know when we confirm our dates and venues.