Making Tax Digital
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the annual tax return for millions.
Did you know?
Digital accounting records are to become Compulsory for Everyone!
It feels like a long time ago that the Chancellor announced in his March 2015 budget, that this was ‘the end of the tax return’ as we know it. His intention was for businesses to be required to digitally file tax returns on a quarterly basis.
To be able to do this the Chancellor, in his autumn speech, promised an injection of £1.3bn to deliver ‘the most digitally advanced tax administration in the world’ by 2020. He led on to say that ‘By 2020, businesses will be required to use digital tools, such as software or apps, to keep records of their income and expenditure.’
So what does this mean for you as a business owner and a tax payer?
The new digital tax accounts (DTAs) will require most self-employed people, businesses and landlords to keep track of their tax affairs digitally and update HMRC “at least” quarterly. ‘This will give individuals and businesses a more convenient real-time view of their tax affairs, providing them with greater certainty about the tax they owe,’ said Osborne in his autumn statement speech.
So what does digital form actually mean?
Surprisingly this does not mean an excel spreadsheet. In fact each business and landlord will have to use a form of accounting software which will have a capability to communicate with HMRC’s systems.
When is this going to happen?
The plan was to implement the scheme for income tax and NICs from April 2018, VAT from April 2019 and corporation tax from April 2020. However, due to other pressing matters the MTD initiative was removed from the finance bill 2017.
HMRC have however this week announced that making tax digital is back! From 2019 businesses that are over the VAT threshold will be required to keep digital records for VAT purposes.
Other businesses will be required to keep digital records and update HMRC quarterly from 2020 (instead of 2018 as originally proposed)
What does this mean? Like it or not, making tax digital is going to happen, but the good news is that deferral has meant that business owners have more time to prepare for the inevitable change.
How can we help?
Moving to a digital software package will mean a lot of extra work and maybe a headache for some business owners – and will be a massive step.
Here at the peloton bookkeeping and number crunching really floats our boat, and we would be delighted to help you.
We are gold partners and accredited trainers of the digital software Xero, and would recommend that our clients sign up this cloud-based accounting system which will comply with the HMRC digital requirements.
We can set you up, train you up, or even take over your whole bookkeeping function. If you want to find out more about The Peloton and Xero, please click on the following link: https://thepeloton.co.uk/xero-accounting/
We will be monitoring the implementation of this electronic system and will post future news here on our website.
We’d love to help you bring your tax affairs into the digital world. It really does make life so much easier. Please contact us to discuss in detail how we can help.