Q: I run a business and I need to acquire some MTD software. Is HMRC providing it for free?

A: No. HMRC is not going to provide free software for businesses. It is relying on the accounting software providers to offer free software products. It believes MTD will transform the software market, bringing about increased competition between software providers, with the end result being highly price competitive products.

Whilst HMRC does not recommend any named software suppliers, it does publish a list of commercial suppliers who have produced simple record keeping applications. The list can be viewed here

HMRC has also kept out of providing software itself to reassure software companies that their investment decisions on providing no cost and low cost products will be unaffected by competing HMRC products.

Q: Why can’t I just upload the trading and expenses spreadsheets I am already keeping in my business straight to HMRC?

A: There are a number of reasons why. Businesses around the UK keep bespoke spreadsheets specifically tailored to their own needs, which means the data cannot easily be transmitted in a standard form directly into HMRC’s digital software. 

However, HMRC has given ground on this issue and is now considering the use of standard generic spreadsheets for businesses to use.

Q: I have kept my business records in paper format for years. I have never been under enquiry with HMRC and my accountant tells me I keep robust records. I am worried I might start making mistakes when I am forced to keep records digitally. Has HMRC considered business owners like me?

A: This is a common concern that has been raised. Previously compliant businesses may turn into non-compliant businesses in HMRC’s eyes, purely because they are being asked to keep their business records in an unfamiliar format. HMRC is intending to help businesses by offering webchat, instant messaging, encouraging the use of trusted helpers in the form of family and friends who may be more tech savvy, as well as working with charities and libraries to provide assistance and WIFI facilities. 

Q: I run a small business and keeping digital records could be the final straw, with the extra time, effort and cost I will have to devote to getting MTD right. I want to be earning a living rather than getting overwhelmed by accounting software. Are there any proposals to exempt the smallest businesses?

A: HMRC has announced MTD will only apply to unincorporated businesses and landlords with a gross annual income over £10,000.

Micro, small and medium businesses trading under the VAT registration threshold have also been given an extra year to prepare for MTD. Originally the entry date for MTD for these businesses was going to be April 2018, but this has now been put back to April 2019.

Q: If digital record keeping is forced upon me and I start to make mistakes, what will HMRC do?

A: HMRC is intending to have a ‘soft landing’ period, where no penalties are charged as people start to get to grips with all the changes. HMRC is currently consulting on a new penalty regime for people who fail to submit their quarterly summaries after that ‘soft landing’ period. The new points based penalty regime may be very similar to driving licence penalty points, with a financial penalty imposed only when points reach a certain level.
HMRC is going to launch an MTD pilot in April 2017 and has confirmed no penalties will be charged during the pilot period.

Can we help?

If you have any questions about Making Tax Digital please contact our Head of Technical Research, Guy Smith, on 0345 223 2727 or at g.smith@abbeytax.co.uk.