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MAKING TAX DIGITAL - LATEST UPDATE

In previous newsletters we have provided details of the changes being proposed by HMRC that will impact all individuals and businesses who have to file a tax return. This is a major change and will affect all of our clients over the next couple of years. It is HMRC’s intention that more and more information for our tax returns will be processed digitally during a tax year. Effectively your tax account will become “live” with information being updated from numerous sources.

The initial plan was:

  • Sole traders, partnerships and taxpayers with rental income exceeding £10,000 to keep digital records from April 2018,
  • Businesses who are VAT registered to quarterly report for VAT digitally from April 2019 (these submissions will effectively replace the VAT return),
  • Companies to make quarterly digital reports to HMRC from April 2020.

Following the Budget on 8 March 2017, the government announced that it will provide an extra year for small businesses and landlords to prepare before they are required to keep digital records and send HMRC quarterly updates. Therefore businesses that have an annual turnover below the VAT registration threshold will not be required to start keeping digital records and providing quarterly updates until April 2019, although they can choose to do so voluntarily.

The changes are being introduced gradually as follows:

  • April 2018 - Income tax for businesses, self-employed people and landlords with annual turnover above the VAT threshold,
  • April 2019 – Income tax for businesses, self-employed people and landlords with Annual Turnover above £10,000. Digital VAT reporting for registered businesses (effectively replacing the VAT return),
  • April 2020 – Corporation Tax for companies.

The other key facts, such as deadlines and penalties, as mentioned on our earlier newsletters still stand.

As your accountants, we are keeping abreast of developments as soon as they happen. We are already starting a program of putting clients on cloud based programs in anticipation of the digital requirements.

Whilst the idea of change has been greeted by many with dread the fact is that with the development in IT the adoption of cloud software will not only meet the requirements of the new tax regulations but potentially transform many of our clients’ businesses for the better. For many clients the adoption of a cloud package will reduce their book-keeping time (bank feeds, digital recording of invoices, emailing sales invoices etc…), plus improve the efficiency of their business (automatic payment of emailed sales invoices, easy conversion of quotes to sales invoices, user friendly dashboards , numerous apps etc…). Technology is moving at a breakneck pace and as a firm we are determined to keep ahead of the game!

If you would like to know more about how digital tax will affect you, please contact Jan Friend, Head of Tax, here or if you would like to discuss switching your record keeping to a cloud based program, please contact Gavin Hooker, Head of Business Support, here.