I have been made aware that FreeAgent will be mandating ALL their users into the new Making Tax Digital regime even if they are outside of the scope of the new legislation.
This was announced in a recent Making Tax Digital webinar (screen shot of slide above).
The new Making Tax Digital rules apply to VAT returns filed after 1st April 2019 for businesses who have a turnover in excess of £85,000.
Despite these clearly defined rules FreeAgent have indicated that they will be turning off the old method of filing after October 2019 for VAT registered businesses with a turnover of less than £85,000.
This means that despite the businesses being told by HMRC that they do not have to comply with the new rules, FreeAgent have decided otherwise and will put them into the new system regardless.
It is unclear at this stage as to how FreeAgent will share this news with users and accountants as there has been little in the way of effective communication.
On twitter FreeAgent say “We haven’t made any final decisions yet”.
Unfortunately this contradicts what I was told on the phone today when the FreeAgent advisor said that the old Gateway would be turned off and suggested that I file manually via the HMRC website for clients that didn’t need to use the new Gateway as they were outside of the new rules.
The tail wagging the dog
The issue I have with all of this is that it is hard enough explaining Making tax Digital for VAT to businesses and clients (i.e. that you’ll be filing exactly the same data as you did before but through a new shiny Gateway) without having to explain that different rules apply depending on what software you use.
Our communication to clients under the £85k turnover mark so far has been that they are not caught within the new rules.
I do not relish the task of going back to clients to say:
“Yes those are the rules under the law but if you are using FreeAgent then they have decided that the new rules will apply to you”.
Is it me or as a sentence does that sound dumb?
I do hope that FreeAgent reverse their decision. It’ll be interesting to see what other suppliers are proposing to do on this.
Surely we can’t end up in a world when HMRC have told the very smallest of businesses that they do not need to comply with Making Tax Digital but software vendors force them into the new regime. Wow that would be a funny world to live in!