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Making Tax Digital in the healthcare sector

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  • Publish date: 20 July 2017
  • Archived on: 20 July 2018

With the Treasury and HMRC having announced a new timetable for the introduction of Making Tax Digital, we look at how to prepare for the new requirements.

Making Tax Digital (MTD) was the buzzword in the world of accountancy right up until the General Election was announced, when it was withdrawn from the Finance Bill due to lack of time.

It was speculated that this meant it had disappeared, but in a recent press release the Treasury and HMRC announced a new timetable for its introduction.

The statement acknowledged the concerns raised by accounting bodies, agents and businesses, that the old timetable was too rushed and did not allow proper time for full testing of systems and educating of clients.

The new timetable

Making Tax Digital will not be mandatory until April 2019. Even then it will only apply to businesses with a turnover above the VAT threshold (currently £85,000), who will have to keep digital records for VAT purposes only. Other businesses whose turnover is below the VAT threshold can choose to use the system but will not be required to do so. 

The press release announced that the scope of Making Tax Digital would not be extended to other taxes until the system has been shown to work well, and that the earliest this would be is April 2020. This is a reassuring step that will ensure that the system can be fully tested before other taxes come online. 

Impact on clients

For healthcare clients, while many will have turnover over the VAT threshold, many will not be VAT registered due to the majority of their income being exempt. However, dispensing practices will be required to keep digital records from April 2019. Many of these practices will already be keeping their accounting records on Sage, Iris or similar products, and so should not be too troubled by the changes. There should be little problem educating these clients.

The full timetable will not be released until the new Finance Bill is published, so it is not known exactly when other clients will be affected, but we do know it will be some time after April 2020. 

Decisions, decisions…

The decision faced by many accountants is whether to delay pushing clients towards using MTD-compatible software until they absolutely have to, or to persuade them of the benefits and change them over sooner. One advantage of cloud packages is better accounting information, while another is in-year access to figures, enabling the accountant to provide up-to-date advice. Such packages can also be cheaper than clients’ existing ones, and provide much more useful reporting information.

For the newly qualified GPs who are intending to be locums, packages such as MyLocumManager will produce their invoices and their locum A and B forms, as well as keeping their accounting records and creating a summary of these for their accountant. These GPs will then also be ready for the introduction of MTD, with no transition necessary. Such software is easy to use, something that is really important to those who are new to being a locum: they save time on record-keeping and have more time for the rest of their role.

Early preparation

While it may seem a long time away, April 2020 will be here sooner than we think. Early education of clients will make the process so much easier and they will adapt to the changes more effortlessly when they come in. Making Tax Digital will be a big change for organisations, and will fundamentally change the way that accountants provide services to their clients. For those in the healthcare industry, education will be vitally important in order to be sure that clients are aware of their new responsibilities at the earliest opportunity. In the face of many other changes to their work environment, along with increased workloads and complicated tax affairs, this is a welcome postponement: it will allow those in the healthcare sector the time they need to be fully prepared for the new system, allowing for a seemless transition to the new reporting requirements.

Claire Hebdige, Tax Manager, Dodd & Co Chartered Accountants

Healthcare Group, July 2017