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Here is our latest update on Making Tax Digital. In previous newsletters we have provided details of the changes being proposed which will impact on all individuals and businesses who have to file a tax return. This is a major change and will affect all our clients at some point in time. However, the end game will be that more and more information for our tax returns will be processed digitally during a tax year and effectively your account will become “live” with information being updated on to your tax account from numerous sources.

Here are the key facts as we currently understand them:

  • Sole traders, partnerships and taxpayers with rental income will need to keep digital records from April 2018 and report them quarterly to HMRC– there will be an exemption for those with low turnover, probably below £10,000
  • Businesses who are VAT registered will need to report for VAT digitally from April 2019 (these submissions will effectively replace the VAT Return)
  • Companies will need to make quarterly digital reports to HMRC from April 2020
  • There will be a few exemptions from digital reporting on grounds of age, religious beliefs, internet access and for charities
  • In addition to the quarterly reports there will be a final submission at the end of the accounting period
  • The deadline for the quarterly reports will be 30 days from the end of the quarter. The deadline for the final submission will be 10 months after the year end
  • There will be penalties for late quarterly and end of year submissions, although these will be postponed for the first year whilst everyone is becoming acquainted with the new system
  • There will be a facility for taxpayers to continue using spreadsheets for record keeping but this is likely to be restrictive. We are proceeding on the basis that digital record keeping will be the quickest and most cost effective method for the majority of our clients
  • Taxpayers will each have their own digital account which will be pre-populated with information already held by HMRC, such as salary figures. When the quarterly submissions are made the accounts will be updated to show the amount of tax due to date in the tax year
  • Initially there will be no need for taxpayers to pay their tax any earlier than they currently do, but with the option to do so on a voluntary basis. It seems likely that eventually the system will move towards mandatory earlier due dates of tax

As your accountants we are keeping abreast of developments as soon as they happen and we’re already starting a program of putting clients on cloud based programs in anticipation of the digital requirements. If you would like to know more about how digital tax will affect you please contact our tax manager Jan Friend or if you would like to discuss switching your record keeping to a digital software product please contact our business support manager Gavin Hooker.