1:59 pm, April 27, 2021
Dealers are being urged to make sure they plan now for the next phase of the Making Tax Digital initiative.
So far, it has included electronic VAT returns and payroll by real-time information. Now HM Revenue & Customs is looking to introduce it for corporation tax.
A consultation has just been completed and a pilot will start in three years, with the full system, which will be applicable to all firms, beginning in April 2026.
That all might seem like a long way off but tax specialists BDO say car dealers should be aware of the potential changes now to plan for their introduction.
Tax partner Chris Bond said: ‘There is a real need to get ready for this change now so that you are in control of the process, not playing catch up at the last minute before Making Tax Digital (MTD) is upon you, because it will affect all retailers.’
Among the main changes being anticipated are:
- The need to make quarterly returns (within one month of the quarter end date) and an end-of-year tax return using MTD-compliant software
- The need to report transactions in a prescribed manner
- A focus on DMS data that may need to be compliant with generally accepted accounting principles
He added: ‘Although it is some way off and the detail is likely to change, there is no doubt that MTD for corporation tax will be implemented.
‘The government believes that there is a gap of £2.1bn in tax revenue across the economy that is either lost or deferred because of the current system.’
Areas dealers need to consider include:
- Ensuring your finance team has experience of both taxation and MTD systems so they can develop these over the next three years
- Working with your advisers to ensure your finance teams have had training on the changes and have an action plan to deal with them
- Reviewing your DMS system and working with your software providers to make sure the system will be MTD-compliant at the right time
Bond added that dealerships may also have to rethink their existing finance team, its abilities and structure, as a member of the finance team will need to take responsibility for the quarterly returns.
