(Time to read: 3 minutes)

By Russell Finn

The government has recently revised its roll-out of the “Making Tax Digital” system. Now only VAT-registered practices will be required to keep digital records from April 2019, and only for VAT purposes.

So, the average practice will have until April 2020 before they have to start reporting their income and expenses quarterly to HMRC through digital software.

Here is a recap of what “Making Tax Digital” will mean for GPs:

• GP practices will have to update HMRC via software not online forms, each quarter at a minimum, with accounting information to work out a taxable profit.
• This information will then automatically feed into the partner’s tax returns to see tax liabilities as they are incurred.
• The information HMRC already holds (payroll, pensions and interest information) will also be automatically included.
• The system will allow taxpayers to manage tax payments and claim repayments during the year on a pay-as-you-go basis.
• You will be able to talk to HMRC via emails, web chat and via their accounting software.

However, it’s very unlikely that the NHS’s system and HMRC’s system will ever be integrated to a point where it would automatically pick up NHS income.

Practices that don’t use the software interface but fill in forms on the Government Gateway, will no longer be able to do this, as HMRC believes this is prone to error.

Like other new systems that have been introduced, such as real-time information for payroll and auto-enrolment for pensions, there will probably be put in place a penalty regime for practices that do not follow the new rules.

Cloud software

Many practices are starting their conversion to Cloud accounting software, which gives the practice the advantages of automatic bank feeds and accountant access direct into the software.

These systems are currently leading the way in discussions with HMRC over the best way to implement HMRC’s ideas and bring about software solutions.

They also benefit from a host of other features such as repeating invoices, automatic budgets, free training and a simplified user interface.

Pilot system

From April 2018, the beta system will go live to any sole practitioners or locums who wish to become early adopters of the system. Partnerships will follow on a year later and the beta system is only open to individuals who receive income from only one trade. However, there are only two compatible accounting systems, Iris (not GP accounts, but their personal tax product which accountants use) and Kashflow (their Cloud-based accounts system), and Rhino which is a Cloud-based record system.

More systems should become available soon as the pilot progresses.

By Russell Finn 
Specialist Medical Accountant at Harold Sharp

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