The government’s flagship tax initiative, making Tax Digital, or MTD, is set to launch in 2019. But with the House of Lords reviewing the scheme and several major organisations calling for a delay – including the British Chambers of Commerce – it looks like there might be some further changes to the plan.
The main objection to the launch of the scheme (which will be voluntary in 2019 and then rolled out as compulsory in 2020–21) is that even now around 24% of businesses have never heard of it. According to a study carried out by the BCC, another 66% of businesses had heard of the scheme but had no real idea about what it was supposed to achieve. Only one in 10 firms knew any significant details and only 6% had contacted the HMRC to ask for advice.
So, it is fair to say that the MTD has had a rocky start. But assuming it does go ahead (and even if the scheme is delayed, MTD will be rolled out at some point in the future) how will it affect jobs in the finance industry?
Those who work in the finance sector have been saying for some time that it is a good idea to prepare for MTD as early as possible. While the time for early preparation might have long gone, there is still action to be taken if the scheme is not delayed.
In the past, accountants for small businesses have taken the receipts (often stuffed into a shoe box or similar) and processed these into an accurate summary of yearly taxes. This manual way of doing taxes works, but only just, and places an unnecessary strain on businesses and especially accountants. Rather than seeing MTD as something to be feared, it should be viewed as an opportunity to streamline your business and start making processes better and more effective.
MTD aims to make all tax for businesses digital, with regular and real time updates through compatible software. This means that your accounts are maintained throughout the year and an accurate record of tax kept at all times. So no more stuffing the contents of a shoe box into your accountant’s hands at the start of April and praying they can make some sense of it.
This change of mindset is likely to have a big effect on the finance industry, but it’s one that could be overwhelmingly positive. The transition to a digital accounting system could be a huge bonus for accountants who can use this opportunity to educate clients about which aspects of the business they can focus on, in terms of tax. It also opens up a lot of opportunities, in terms of educating businesses in how to use accounting software and how to get their heads around the MTD scheme.
Businesses will need assistance in getting to grips with how their internal processes work. It can no longer be about just foisting the problem onto the accountant when the time comes. MTD is about maximising tax revenues, but also encouraging businesses to work smarter in the future. As an accountant or finance professional, you can work with clients to help them fully optimise their books and tax regime. And once they have the basics right, you can then help them to build on this to use technology to their benefit in other areas of the business. Using this information in real time is not just good for taxation organisation, but can also shine a light on various other areas of the business.
There is no getting away from the fact that MTD is happening. Working in the finance industry, you need to help your clients prepare for it. This is the time when you can help them to transition to a better way of working, which will benefit both them and your practice in the future.
This is why many in the financial industry think that calls to delay the MTD launch are a backwards step. Sure, there may have been some communication issues around what the scheme is for and when it comes into effect. But there’s no denying that the scheme is inevitable and will have an overall beneficial effect. So why delay what is surely going to have a positive outcome in the long-term – and for all parties?
This is what has prompted a spokesperson from accounting software Sage to say: ‘The UK cannot sit back any longer; we absolutely need to be in the driving seat and stand up as a leader in the digital arena. Just this week we welcomed the government’s £2m fund to help small businesses adopt technology to help boost their productivity. Making Tax Digital is one of the biggest opportunities the UK has to use technology to cut back on unnecessary business admin – further delays and ambiguity is not what our country’s businesses need.’
The spokesperson when on to add: ‘Sage believes that the call by the British Chambers of Commerce, to delay the start of Making Tax Digital (MTD) for VAT by up to two years, is a backwards step in helping thousands of UK businesses on their digital journey. Since the launch of this important initiative by the government, the technology sector has stepped up to offer businesses (of all sizes) the access to advice and tools they need to succeed.
‘We talk to thousands of customers and accountants every day and what businesses are calling for is clarity and certainty. Sage will continue to fight for a clear path forward so that we can embrace the opportunities technology brings, not hide from it or attempt to hold it back.’
It is clear that many others in the finance industry also feel the same. Whether the changes happen next year or a few years down the line, the effect will be the same, so why not start benefiting from the positive aspects of MTD sooner rather than later? It would certainly be good news for accountants and the job market in finances in general.