‘Major MTD headache’ to hit some firms from July

Software houses and HMRC are being urged to identify Making Tax Digital (MTD) compliant software packages, which will need to be in place for some in just five months.

The ATT says April 1st 2019 is the earliest MTD ‘go-live’ date for firms above the VAT threshold, but it warns that some of these must act sooner to avoid a “major headache”.

“The first businesses to come into MTD will be those with a VAT quarter running from 1st April to 30th June 2019,” said the Association of Taxation Technicians (ATT).

“[But] if they happen to have a 30th June year end, they will need to have an MTD-compliant accounts package in place by 1st July 2018 or risk changing their accounting package mid-year.”

This is the headache, as when those affected come to do their accounts or tax return, the information would be spread over two systems. It would also make it difficult to get an in-year view of profitability,

“Where a business has an accounting period which spans their first MTD VAT quarter, they will have to ensure they have appropriate software in place at the start of that accounting period”, says ATT’s Yvette Nunn. “Or [they] risk having to change accounting software mid-year.”

HMRC has said an online tool to help businesses identify which software packages will meet their MTD needs would be provided. But the tool is yet to be made available.

“The ideal solution would be for the MTD for VAT start date to be altered so that it applied from a business’s first accounting period (and not VAT quarter) starting on or after April 1st 2019," Nunn said.

“If that is not possible, we would urge software houses and HMRC to identify as soon as possible which packages will work for MTD. Businesses also need guidance on what they should do if they only find out in the middle of an accounting period that their software package is not likely to be MTD compliant.”

MTD recap:

MTD was originally to be introduced for income tax from April 1st 2018. However, on 13 July 2017, the government announced that it would be delaying the introduction of MTD. Under the new timetable:

  • Initially, only businesses over the VAT threshold (currently £85,000) will have to keep digital records.
  • Digital records will only be required initially for VAT purposes, and only from April 2019.
  • Business will not have to keep digital records or report quarterly for other taxes (e.g. income tax and corporation tax) until April 2020 at the earliest.
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