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For all those people who, like me, have been wondering why Her Majesty’s Revenue and Customs (HMRC) are forcing small businesses down an unfamiliar and complicated road with Making Tax Digital (MTD), the answer is crystal clear.
Just type the words “HMRC” and “MTD” into a search engine and a full explanation will unfold. If you read the descriptions of how and why, you will soon come across the line which states “latest tax gap figures show that avoidable mistakes are costing the Exchequer over £9bn a year”.
The government makes no bones about intending to recover that full amount through the implementation of this new scheme.
MTD is currently affecting some farms, but will undoubtedly have an impact on all of us within the next few years. Anyone who thinks the line has been drawn solely for those businesses with an annual turnover of more than £85,000, and won’t be moving, may possibly have only the faintest grip on reality.
I would confidently predict that within three or four years, all VAT-registered farms will have to submit not just digital VAT records, but also quarterly income tax returns. This whole digital VAT business is merely the thin end of the wedge.
With that somewhat pessimistic view lodged firmly in my mind, I decided to take the plunge at the earliest opportunity and go the whole hog.
In truth, my accountant seemed to be ahead of the game, and convinced me to embrace a completely new method of bookkeeping. He not only painted a bleak picture regarding the information vacuum for farms and businesses, he also was firmly of the opinion that plenty of his accounting colleagues were unprepared for the approaching storm.
And after discussing the new rules and regulations with a selection of fellow farmers, I would tend to agree with him.
In early December, I signed up to something called Kashflow Accounting. I could have chosen any one of a dozen packages, but this one was recommended by my accountant, and he thought it offered a comprehensive range of useful information, while also being able to connect automatically to HMRC.
He reckoned it was straightforward and relatively simple for someone like me to use, so I bit the bullet and signed up (at £15 per month). At this stage, all I can say is that if this system is simple, I wouldn’t like to see one that was complicated.
Struggled
They say you can’t teach an old dog new tricks, and this adage kept repeating itself over and over, as I struggled to make any sense of what was in front of me on the computer screen.
My accountant arranged four sessions with me and introduced the whole concept in stages.
After the first two sittings, I thought I was going to have a nervous breakdown, and seriously considered paying him to take over every aspect of my bookkeeping.
He tried to reassure me that everything would eventually click into place, but I just couldn’t imagine ever getting to that stage, as all sorts of new words flooded into my vocabulary. “Reconcile bank”, “mark as read”, “send to” and “reports” are all computer terms that didn’t initially make sense.
Gradually, I began to understand why I was clicking on individual icons (as opposed to doing it just because he said so) and bit by bit, the pieces fell into place.
After four sessions with him holding my hand and mopping my fevered brow, I began to almost enjoy what I was doing. And the culmination of all those hours of mental anguish saw me submitting (on 18 January) my first VAT return.
Information
Apparently, this new system will enable me to perform all sorts of tasks with figures and numbers, and this in turn should provide me with information that could offer the chance to better manage my tax implications well in advance of any nasty surprises. There are pie charts, graphs, and a host of pages that I haven’t even thought about exploring yet.
But for now, the initial euphoria at finally coming to terms with a brand-new accounting package has been replaced with a dose of reality: I owe the vat man £763.81.
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