Making Tax Digital - More Questions Than Answers?

December 2017

HeroWith the postponement of the original Making Tax Digital (MTD) deadline, the focus switches in the short term to digital VAT filing. The MTD delays were announced by HMRC as being due to “listening” to the concerns of the professional accounting and tax bodies that the original proposals were far too ambitious and unachievable.

Making Tax Digital has not been cancelled… the ultimate vision and goal of HMRC has not changed - what has changed is the timescale to achieve this vision.

The result is the implementation of digital VAT return filing for certain VAT registered businesses commencing with the first VAT return period starting after April 2019. (There is still some confusion over the exact date which HMRC have yet to clarify).

What has been confirmed recently is that after April 2019, those businesses that make voluntary VAT submissions (i.e. those registered traders with turnover below the VAT threshold) will still be able to use the existing Government Gateway method to file their VAT returns. All other businesses will need to file via “API links”. An API – Application Programme Interface – is a direct link between the accounting or other software and the HMRC software.

The General Data Protection Regulation – New requirements for all businesses!

European data protection laws are changing and come into force 25 May 2018. These new laws will affect all businesses in the UK and the current Data Protection Act (DPA) will be updated to reflect the GDPR obligations.

The GDPR is a framework with greater scope, much tougher punishments and judicial remedy for those who fail to comply with new rules around the storage and handling of personal data, be it in physical or electronic format.

Why are these new laws being introduced?

Can I claim my gym membership as a tax deductible expense?

This is a common question from many of our clients and the answer does depend slightly on whether you are a sole trader, partner in a partnership or you are employed.

The general rule for a business (so that is the sole trader, partnership or limited company) is that an expense should be “wholly and exclusively” for the purposes of the trade. If you apply this principle correctly tax relief will be denied on any expenses which have “duality of purpose”. So if there is both a personal benefit and a business benefit then HMRC will not allow you to deduct it as an expense. Gym membership is not for the benefit of a business even if you occasionally meet a business client there so in all normal situations tax relief is not available.

Making Tax Digital (MTD)

I am getting increasingly fed up reading articles about the delay in Making Tax Digital being a positive. The hint is in the word “delay”. Ok so some unpopular bits of MTD have been changed but that doesn’t mean it will never happen. HMRC have a target and a “big” budget to achieve this target so it will happen. We simply have an extra few years in which to be ready.

So does this mean accountants can just relax and say “great I don’t need to worry about this for another two years.”  What???  Of course not. It takes time to train clients in using the cloud accounting software needed to cope with MTD and they also need time to practice. The accountants will need to cope with this extra work while still doing their everyday stuff.

Legally anyone can call themselves an accountant

 Unlike the term Solicitor, Independent Financial Adviser (IFA) or Architect, the word Accountant is not protected. Yes an unqualified solicitor can lose you money, lose your rights, even lose your property so it is important that a solicitor is formally qualified so you are protected. Yes an unqualified IFA can lose your cash in a dubious investment or put your pension into a poorly performing fund so it is important that your IFA is formally qualified so you are protected. And yes an unqualified Architect can design a building which could fall over so your biggest investment you will ever have could be left valueless so it is important that your Architect is formally qualified so you are protected.