Making Tax Digital
Making Tax Digital is part of the government’s initiative to make it easier for individuals, landlords and businesses to manage their accounts. HMRC plans to move larger businesses and landlords to a fully digital tax system by 2020. This will mean the end of annual tax returns for many and the start of quarterly tax returns.
Benefits of Making Tax Digital
We hope that some of the benefits of the Personal and Business Digital Tax Accounts with HMRC will come into effect before quarterly filing becomes compulsory.
Better use of information – data gathered from banks, building societies, employers and government departments will mean that you will not need to re-submit this as part of your tax return.
Tax in real time – will mean that you will not have to wait until the end of the year to find out how much tax to pay.
A single financial account – similar to online banking, you will be able to view your tax affairs and information held by HMRC at any time.
Elimination of form filling – Interacting digitally through online record keeping.
A new timetable was announced in July 2017, which has pushed back the start dates for the quarterly filing of accounting information. Despite this welcome delay, we would recommend that businesses and landlords take advantage now of new technology that can make record keeping simpler and easier.
VAT returns – From April 2019 these are to be filed through the new “account” with HMRC; and VAT registered businesses to keep “digital records”.
Keeping digital records – April 2020 for larger business and landlords.
Quarterly filing for business and rental income – April 2020 for larger businesses and landlords, with an income above the VAT registration threshold, currently £85,000 per year.
Quarterly filing for smaller businesses – The latest announcement says that “Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.”
This should hopefully give smaller businesses the flexibility to decide when to start quarterly filing. However, some smaller businesses may have no choice as to when they start doing this, as HMRC could link it to claims to Working Tax Credits, Child Tax Credits or Universal Credit.
The eventual move to quarterly filing is likely to mean that you will have to change the way in which you keep your records and we are ready to support our clients with these challenges. By offering advice and by using technological solutions we are making our clients’ lives a lot easier, by saving time and being more efficient.