Get prepared for the biggest change in Tax Reporting in 20 years.
What is happening?
The Government have introduced legislation that will, in time, require all businesses and property letting landlords to maintain their records in digital format using software or apps on computers, laptops, tablets, mobile phones or a combination of any of them using digital cloud based applications.
Businesses & property letting landlords will be required to submit summary information to HMRC via a “Digital Tax Account” on a quarterly basis within 30 days of the quarter year end.
Business & property letting landlords will also be required to make an annual “End of Period Statement” for the specific business to HMRC via a Digital Tax Account within 10 months of the end of fourth quarter.
Business & property letting landlords will be required to make a final declaration similar to that provided with a Tax Return currently to report any other income such as employment of savings income or to make any claims for allowances. This will have to be made via a Digital Tax Account and will normally be due on or after 31 January after the end of the Tax year.
Are all businesses affected?
The very smallest ones will not be affected. At present the Government have suggested that businesses with turnover below £10,000 will be exempted from the requirement. For the avoidance of doubt, turnover means income before outgoings.
I can’t use the internet – can I be exempted
HMRC have indicated that the “digitally excluded” may be exempt from the requirement. They have indicated that those who cannot, by any means obtain a decent internet connection to use the technology that will be required to comply with the obligation, may be considered as “digitally excluded”. They have also suggested that elderly persons who do not have younger family members or friends to help them or can afford an Accountant may also be accepted as being “digitally excluded”. Finally they accept that those who “belong to a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records” can be excluded.
I prefer to keep my records manually – can I do this under the new system?
Probably not. A leading HMRC official is on record as stating that businesses will have “no choice but to keep their records electronically”. The final standards and requirements have not yet been published, but the new legislation that has been published makes it clear that records must be maintained electronically.
When is it happening?
The first tranche will be all sole traders, partnerships and property landlords with turnover in excess of the VAT thresholds (currently £85,000) will be required to commence quarterly reporting under the new system from April 2018.
The second tranche will be remaining sole traders, partnerships and property Landlords with turnover in excess of £10,000 will be required to commence quarterly reporting under the new system from April 2019.
All VAT Returns will be required to be made using the Digital Tax Account from April 2019.
All Companies and any partnerships with turnover in excess of £10M will be required to commence quarterly reporting under the new system from April 2020.
Why is it happening?
HMRC state that tax gap figures show too many businesses are prone to making mistakes. The amount of tax not collected due to avoidable taxpayer errors and carelessness has risen to over £8bn a year. HMRC believe that by using technology to keep business records that mistakes will be reduced and that this is turn will reduce the need for business compliance checks by HMRC in future.
HMRC state that it will bring in the tax system into line with what businesses and individuals now expect from other service providers: a modern digital experience. New technology is continually transforming the way people and businesses shop, bank, travel, communicate, and trade. The appetite for digital services is strong, and relying on a predominantly paper-based tax system makes no sense in the 21st century.
What are Cannon Williamson doing?
We have been in discussion with leading software providers such as Xero and Sage and are ready to help our clients with every step of the journey to the point when quarterly reporting becomes second nature. We have identified solutions that we feel will help save time now as well as help our clients be prepared for when their first quarterly report to HMRC is due.
We already offer a Bookkeeping service and will be contacting our clients who take advantage of this service to discuss the implementation of solutions that we feel are necessary to allow us to deliver a service that will meet the requirements of Making Tax Digital in the future.
Our bookkeeping service allows our client’s to focus on running their businesses. If you would like us to deal with the recording of your business income and expenditure so that your business fully meets the requirements on the Making Tax Digital Service, please contact us.
Making Tax Digital Health Check
The requirement to keep all records electronically will transform the way in which every business operates. Every business whether it is sole trader to a large company will have to prepare for these changes and undertake a deep review of its record keeping processes.
Every business will require a solution that addresses their own specific needs. We think that it is important that the preparation for the new regime begins now, so are pleased to offer our Making Tax Digital Health Check. Our Health Check will offer the following:-
- We will discuss with you how your business records are maintained at present.
- We will work with you to find solutions that will work for you and your business enabling you to be prepared for the new regime.
- If deemed necessary, we will assist in facilitation of any training that you or your employees may require.
- We will check records maintained using any newly implemented systems to ensure that they will meet HMRC requirements for digital record keeping.
If you would like a Making Tax Digital Health Check please contact us:-
Making Tax Digital Opportunities
We see that Making Tax Digital offers us a real opportunity to transform the service we offer our clients, through the use of smarter, innovative, real time information sharing systems and technologies. When the system is fully up and running, we will have an up to date and accurate understanding of how our customer’s business is performing meaning that the advice we give you will be based on a real understanding of your business.