MAKING TAX DIGITAL
Changes are afoot at HM Revenue & Customs.
You may have been aware that in the March 2015 budget George Osborne announced that he was bringing HMRC into the 21st Century and abolishing the Annual Tax Return. Well George Osborne has left, but his plans are still in place.
The Making Tax Digital initiative continues to push ahead in the background, albeit at a slower pace than originally planned.
- The method of updating HMRC with your income and expenses information, and the regularity of this update
- An online digital account which will allow you to see your total tax position at any point in time, across all taxes
- The inclusion of a voluntary pay as you go for taxes
- The ability to offset tax overpayments against tax charges across all taxes (not just income tax)
- Reformation of the penalty system
What is Making Tax Digital?
Making Tax Digital is the government initiative transforming the way we report tax to HMRC.
Over the next few years, all business will have an online digital tax account and they will be required to report income and expenses to HMRC on a quarterly basis
When will it start?
The Government’s current plan is that businesses will start using the Making Tax Digital system from April 2019 and only to meet their VAT obligations.
This will apply to businesses with a turnover above the VAT threshold, but other businesses can use the system voluntarily if they wish.
Other taxes will not fall within the scope of Making Tax Digital before April 2020, at the earliest.
How does it affect me?
You will be required to submit your income and expenses on a quarterly basis. This will need to be done using third party bookkeeping software. This essentially means that reporting on Excel spreadsheets will not be accepted.
Does this mean I have to submit 4 tax returns each year?
No. HMRC have advised that there will not be a need to complete 4 tax returns each year. The best way to view the returns, is as a Quarterly Information Update. The details regarding exactly what this process will be are yet to be agreed and disseminated into the public domain.
What do I need to do?
You can register for your own digital tax account NOW. This will mean that you will be set up for when the quarterly reporting applies to you.
We will need you to provide us with your paperwork on a regular basis (at least quarterly) so that we can ensure that your accounts are up to date.
Does this mean I have to pay tax more often?
No. At the moment, we have been told that you will still only have to pay tax once a year, and the deadlines will remain the same for tax payments. However, by making 4 returns a year, you will be able to see throughout the year how much tax you are likely to have to pay. This will mean that you shouldn’t get a surprise at the end of the year.
I only have a small income – will this apply to me?
HMRC have advised that those self employed individuals or landlords, where it is a secondary income of less than £10,000 turnover, will be exempt from quarterly reporting. For example, if you are employed and rent out a property, your total annual rents are less than £10,000, then you will not need to report on a quarterly basis.
How much will this cost me?
For the majority of our clients, we already use KashFlow, an online bookkeeping software, and we have included this charge into your monthly/annual fee. For those that do not use KashFlow there will be an additional charge for this licence cost.
How will Turas Accountants be able to help me?
All the details concerning the roll out of Making Tax Digital have not been finalised. The consultation phase will come to a close on 7th November, so we should know the final details in January 2017. We will be keeping you informed on a regular basis of important dates and announcements. These will be available on our website. We will advise you well in advance of any forthcoming changes that affect you directly.
The full details and consultation papers for HMRC Making Tax Digital is available HERE
If you’re looking for an accountant that can help you with Making Tax Digital at your company, get in touch today