A survey carried out by Thomson Reuters has revealed that businesses are investing significant amounts in new tax technology, such as Making Tax Digital (MTD) software.
The survey, which was put to 438 tax teams, revealed that 98% of respondents intend to invest in tax technology in the next 12 months. 28% intend to increase their spending on technology, whilst 38% expect spending to remain at its 2018 level.
Many firms reported that their decision to increase spending on tax technology was driven by the introduction of such initiatives as the automatic exchange of tax data, and Making Tax Digital for VAT (MTD for VAT).
‘This interest in new technologies indicates that tax departments are recognising that the deployment of tax technology can help increase efficiencies, reduce human error and deliver a consistent and manageable way of addressing . . . new tax regulations,’ said Steve Smith, Proposition Lead for Corporates at Thomson Reuters.
‘Compliance is in the midst of a revolution, and looking forward we can expect to see more regulatory attention to the process and governance, rather than the end number. In a digital world, the tax authorities will easily be able to validate the output. Tax teams need to prepare for this shift now.’
With Making Tax Digital for VAT (MTD for VAT) set to take effect from 1 April, HMRC has warned UK businesses that the registration procedure will take up to seven days to complete.
MTD for VAT will apply for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.
In recently published guidance, HMRC stated that businesses that pay VAT by Direct Debit cannot sign up to the MTD for VAT scheme in the seven working days leading up to, or the five working days after, sending a VAT return.
In order to sign up to MTD for VAT, businesses will require their Government Gateway user ID and password, alongside their VAT number.
Once firms have registered, HMRC will send a confirmation email within 72 hours. Businesses are urged not to submit their VAT return until they receive the confirmation email.
The government has provided guidance on the matter – this can be found here.
Chancellor Philip Hammond’s second Spring Statement was delivered against a backdrop of political turmoil, following the voting down of Prime Minister Theresa May’s Brexit withdrawal deal.
Despite describing the economy as ‘remarkably robust’, the Chancellor offered a clear warning on the potential impact of a no-deal scenario, which he said would put progress on the public finances ‘at risk’ and cause ‘significant disruption’ to the UK economy.
The latest forecasts from the Office for Budget Responsibility (OBR) revealed mixed news on the economy, with the OBR revising down its previous UK growth forecast for 2019 from 1.6% to 1.2%. Meanwhile, the forecast for government borrowing has also been revised down from £25.5 billion to £22.8 billion, with the Chancellor heralding rising wages and a strong employment market.
However, Mr Hammond emphasised the importance of a smooth Brexit transition in securing economic stability, pledging that a £26.6 billion ‘deal dividend’ would be made available to help boost the economy, providing that an agreement can be reached. The Chancellor also confirmed that a full Spending Review will conclude alongside the 2019 Autumn Budget.
Turning to other issues, the Chancellor announced new government investment in the UK’s physical and digital infrastructure, technology, housing and the environment, together with a bringing forward of the £700 million reforms for business apprenticeships previously announced in the 2018 Autumn Budget.
The Chancellor’s statement also confirmed that the government will apply a ‘light touch’ approach to penalties under its new Making Tax Digital (MTD) regime, which comes into effect on 1 April 2019 for VAT-registered businesses. The government will not mandate MTD for any other taxes or businesses in 2020.
Other measures announced include free sanitary products for secondary schools and colleges in England from the start of the next school year, and an additional £100 million fund dedicated to tackling the recent surge in serious violence and knife crime.
Chancellor Philip Hammond will deliver the 2019 Spring Statement today. We will be keeping you up-to-date on the latest developments.
The Chancellor will respond to the latest economic and public finance forecasts from the Office for Budget Responsibility (OBR), and announce some areas for consultation on the longer-term tax challenges.
Ahead of the Spring Statement, business groups have outlined the actions that they would like Mr Hammond to take. The Trades Union Congress (TUC) has called for the Chancellor to increase funding for public services by an additional £15 billion, and increase capital spending by £10 billion.
Frances O’Grady, General Secretary of the TUC, said: ‘Positive action is needed from the government to direct funds to the public services people depend on and rescue them from breaking point. And every part of Britain must get investment in the modern infrastructure needed for growth.’
Meanwhile, the Federation of Small Businesses (FSB) has urged the Chancellor to tackle the UK’s ‘late payment crisis’; commit to a one-year ‘safe harbour’ approach to Making Tax Digital (MTD) fines; and introduce additional measures to make the business rates system fairer.
Research published by the Federation of Small Businesses (FSB) has found that putting Making Tax Digital (MTD) software into place ‘could cost UK small firms an average of £564’.
MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.
The FSB revealed that 23% of small businesses have received quotes for MTD-compliant software, but are yet to make a purchase.
According to the research, bigger businesses must pay higher prices for MTD-compliant software. Firms with a turnover between £500,001 and £1 million could be landed with an average bill of £872 for MTD software. Businesses with a turnover of more than £1 million could be given a bill of £1,019.
‘We’re only three weeks away from the roll-out of MTD, and small businesses are clearly not prepared for it,’ said Mike Cherry, National Chairman of the FSB.
‘That being the case, the Chancellor must double down on his commitment to light-touch enforcement when he delivers the Spring Statement on Wednesday.
‘At a time when small business confidence is in the doldrums – and wages, auto-enrolment contributions and business rates are rising – more costs and admin burdens are the last thing they need.’
With less than a month until the introduction of Making Tax Digital for VAT (MTD for VAT), HMRC is urging the 1.17 million UK businesses which have not yet signed up to the initiative to do so ‘as soon as possible’.
MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). Under the initiative, businesses must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).
According to HMRC, almost 30,000 firms have already signed up to MTD for VAT, with 2,000 signing up each day.
Mel Stride, Financial Secretary to the Treasury, said: ‘It has never been more important for businesses to be able to seize the opportunities that digital technology offers. MTD helps them to do just that – making it easier for businesses to get their tax right first time by transforming how they keep their records and send information to HMRC.
‘It will give businesses more control over their finances, allowing them to spend time focusing on innovation, growth and the creation of jobs.’
A survey carried out by HMRC has revealed that 81% of VAT-mandated businesses are ‘aware of Making Tax Digital for VAT (MTD for VAT)’, either by name or by concept.
MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).
HMRC polled 500 businesses, and found that 43% of firms had heard about MTD through their accountant. A further 13% had heard about the initiative via an email from HMRC; 11% read about it on HMRC’s website; and 9% heard via a letter sent to them by HMRC.
However, only 45% of businesses stated that they plan to sign up to MTD for VAT before its introduction in April. One in five firms ‘don’t have a clear idea’ of when they plan to sign up, and 4% said that they require additional information before they decide.
Commenting on the MTD for VAT initiative, Mel Stride, Financial Secretary to the Treasury, said: ‘HMRC has made good progress in preparing for MTD. The pilots have progressed well, and the full functionality of MTD has been tested with a wide range of different businesses, including some below the VAT threshold, which have chosen to take part voluntarily.
‘HMRC is ready, the software market is ready, and hundreds more businesses are getting ready every day by joining the pilot.’