Making Tax Digital – GP practice guide

Making Tax Digital is a key part of the government’s ambition to have a digital tax system that is more effective, efficient and easier for taxpayers. From 1 April 2019 VAT-registered, dispensing GP practices will be required to make quarterly submissions to HMRC.

With just four months to go, James Gransby, head of healthcare at chartered accountants MHA MacIntyre Hudson, explains what Making Tax Digital is, and what it means for you and your practice

Making Tax Digital for VAT is the first incarnation of the implementation of the government’s overall Making Tax Digital strategy. Non-VAT registered businesses will need to start making quarterly submissions from April 2020 but, for GP practices which are registered for VAT, the start date is now less than four months away.

Delayed implementation

After a series of delays to the start date over recent years there appears to be just one final concession – a six-month deferral to October 19 of the start date for a small number of more complex VAT registered entities to ensure the system is robust enough to accommodate them.

The organisations listed below have the 1 October 2019 implementation date – but dispensing GPs are unlikely to fit the bill:

  • Trusts
  • Not-for-profit entities that are not set up as a company
  • VAT divisions
  • VAT groups
  • Certain public sector entities that provide additional information on their VAT return (NHS Trusts and some government departments)
  • Local authorities
  • Public corporations
  • Traders based overseas
  • Those required to make payments on account (typically, those with a VAT liability over £2.3m)
  • Annual accounting scheme users

A typical dispensing GP practice would not fall into any of the above categories; so, dispensing practices will still have to commence quarterly reporting from April 2019, and non-dispensers from April 2020 (unless this date is extended).

Practice compliance

Practices will need to send HMRC ‘summary data’ each quarter; this will consist of total income and total expenditure, with expenditure broken down into categories such as staff costs and property spend.

Businesses will need to share this information with HMRC through online accounting software. HMRC has confirmed that it will not be providing its own bookkeeping/accounting software and that the use of, ‘digital record-keeping software that links to, and updates, businesses’ digital accounts with HMRC’ will be mandatory.

HMRC is working with more than 150 software suppliers which have said they’ll provide software for Making Tax Digital for VAT in time for April 2019. A total of 33 are on HMRC’s approved list at the time of writing, including most of the mainstream packages that GP practices will typically use, such as Iris, Sage, Quickbooks and Xero.

The software itself isn’t free. While many offer low-cost, introductory packages, practices will need to budget for the cost of new software and, potentially, some training in order for staff to use it properly.

This does not mean the death knell has sounded for the trusty Excel spreadsheet, which a number of dispensing practices use to perform their VAT partial exemption calculations, and some use for their book keeping records. GP practices will be able to continue to use spreadsheets to record receipts and expenditure, which they can then link to software to automatically generate and send their updates to HMRC. More details will be released on this closer to 1 April.

What you should do now

With the deadline less than four months away for dispensers, ensuring your practice is ready when the time comes is now becoming an important issue.

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Currently there are a series of pilots which have been running since October 2018; these will continue until mandatory adoption in April 2019. Your practice could benefit from joining one of them.

The impetus for the Making Tax Digital transition is an effort to streamline and simplify the tax process; initially, there will be some challenges but, for most, these should be simple to overcome.

If you are still unsure about what you need to do, speaking with a specialist medical accountant who understands these issues can help you to prepare your practice for the changes.

James Gransby is head of healthcare at accountancy firm MHA MacIntyre Hudson, and is also an executive board member of the Association of Independent Specialist Medical Accountants (AISMA).

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