The consultation period for Making Tax Digital (MTD) – the replacement of annual tax returns from 2018 – runs until 7th November.
MTD is the biggest change to the tax system since the introduction of Self Assessment in 1997.
The full details of MTD are not yet known but it will mean businesses making quarterly tax submissions, along with payments. The Federation of Small Businesses (FSB) believe MTD will cost a business £2,770 a year.
My take is that if a business is forced to complete a full set of accounts using accounting principles for each submission then I think the costs could be thousands. But, it could be that the tax office introduces new laws allowing businesses to pay tax on what’s called the cash basis. This is the difference between money in and out and means full accounts will not be needed. If this is the case then businesses could save accounting fees because I am sure software will do the submissions for them.
Another option is that three submissions are made on the cash basis and the one annual adjustment is made to align the tax to accounting rules. This would force people to use software and do their bookkeeping on a regular basis but it shouldn’t cost more for accounting support.
I’ll be keeping a close eye on developments and will ensure all clients are ready for MTD. But, it could be that plans are pushed back. The Treasury Select Committee has urged the Chancellor not to rush MTD after hearing from the accounting bodies and the FSB.