Director recently hosted a webinar for leaders and accounting IT experts to share insights about HMRC’s new tax regime. Here’s a summary of the session, including their discussion of its benefits for business owners
“Making tax digital” (MTD) is here – and it’s transforming the UK’s tax administration system. The new regime is central to the government’s plans for HMRC to go fully digital and make the system more effective, more efficient and more user-friendly for taxpayers, both businesses and individuals.
In conjunction with Xero, an award-winning accountancy software firm, Director recently held a webinar to look more closely at MTD. We asked: what are its implications and will it actually benefit businesses?
Joining us to share their knowledge and experience were Becca Young, an education specialist with Xero, and Cheryl Price, a certified chartered accountant and the founder of CH Accountancy. Here are some of the highlights from their discussion.
The practicalities of MTD
The first step in the MTD “journey” is the digitisation of VAT returns, which was introduced on 1 April this year for businesses whose annual taxable turnover exceeds the current £85,000 VAT threshold. Further changes will follow in the years to come.
Young began the conversation by outlining what MTD is, as well as the purpose of the new system and what organisations must do to be ready for it – a process that starts with informing HMRC when you have the requisite accountancy software in place.
She also revealed the key findings of Xero’s MTD for VAT pilot. Price, who’d worked on that project from the outset, shared her experience of switching 40 companies to the new regime. A few teething troubles aside, the process had been straightforward for both her team and her clients. It even convinced one spreadsheet-loving business owner to switch all of her companies over to accountancy software instead.
The advantages for business
While the prospect of such big changes to the system may seem intimidating, Young assuaged fears by detailing the security measures that have been taken to protect data. She also covered the exemptions for businesses that might struggle with infrastructure problems, such as poor broadband connectivity.
Change, of course, can also present opportunity. Young argued that MTD offers a number of benefits to business owners, including the chance to “revolutionise how your business works”. She added that it can also reduce the scope for error, spread the administrative burden and enable taxpayers to see the amount owed changing in real time, so there are no nasty shocks at the end of the tax year.
Price spoke of one client whose VAT inspection was undertaken remotely, taking less than half an hour to complete, once MTD was in place.
“The first thing I’d say is not to panic – there’s still time to get sorted out if you’re not quite ready yet,” she advised the audience. “Speak to your accountant or a software company – and make sure that you have the solution that is right for you.”
Making tax digital – Q&A
The panel fielded questions from the webinar audience about some specific concerns about ‘Making tax digital’
How can the system accommodate international account information – for instance, bank accounts and credit cards held in Japan?
Becca Young: “You would be able to use Xero for any international transactions – we’re a global company. For anything that is specific to VAT, though, we would recommend that you have that conversation with HMRC and see the requirements for global businesses.”
What is the test for qualifying for the remoteness exemption?
Young: “Again, I’d recommend that you discuss that with HMRC. But, while we’re discussing exemptions, there are a couple of others. You’ve got insolvency, for instance. So, if a business is about to become insolvent, it’s not required to follow the MTD rules. That’s also the case if you can’t use software or any type of electronic device for religious reasons. I’d definitely recommend that you discuss those with HMRC.”
Is the information held in the cloud for MTD purposes encrypted at rest, including back-up data?
Young: “Yes, it’s all encrypted and stored in multiple servers around the globe. We use Amazon Web Services servers and they are stored in multiple locations. In case of any sort of corruption to one area, we’ve still got the data stored on another server based somewhere else.”