Making Tax Digital will require software compatibility
03 May 2016
The Treasury Committee has written to the Financial Secretary to the Treasury, David Gauke, outlining their concerns that making tax digital is going to be a costly transition for all businesses if software has to be compatible with HMRC requirements.
The letter refers to research conducted by The Institute of Chartered Accountants in England and Wales (ICAEW) which suggests that 75 per cent of all businesses, and 82 per cent of sole traders, would need to change their record keeping systems to comply with the Government's new proposals for Making Tax Digital (MTD).
The letter also quotes from a briefing by the Tax Faculty team at ICAEW which says that businesses would be required not just to submit information to HMRC online once a quarter, but that they would also be required to do all their record keeping in a prescribed digital format.
Further to this briefing in a news item the ICAEW said:
“One aspect in particular has not, in our view, been as clearly articulated as it might have been. It is that MTD will also include a requirement for digital record keeping. While HMRC has said very clearly that it does not want transactional data in the proposed quarterly returns, what it will want is for businesses and self employed people themselves to keep their accounting records digitally. Verbally we are told that using excel is not digital record keeping; it will have to be accounting software. If so, this will have serious book keeping consequences for many businesses and it is certain that the old brown paper parcel approach to book keeping will be dead.”
The Treasury Committee’s letter also states: “It is not too late to do something about this. A thorough impact assessment is the minimum required before proceeding with the Government's proposals to make digital record keeping compulsory.”
There is to be a wide-ranging consultation exercise on Making Tax Digital which is due to start shortly. The Policy Team will be reading and disseminating all documents to the payroll profession and will of course involve members and the industry accordingly for your invaluable input.