Making Tax Digital
Following an announcement by the government on 25 April 2017 that large sections of the Finance Bill have been removed, the Making Tax Digital provisions explained below have been, as a minimum, put on hold. There is some speculation that these rules will be reincarnated following the general election but in our opinion it seems likely at this stage that there will be at least a delay to the implementation dates referred to in previous HMRC notices.
It is possible that the plans will be dropped entirely but given the ever increasing use of technology, HMRC are likely to introduce similar (if not the same) changes at some point in the future.
What is Making Tax Digital?
From April 2018 HMRC will begin phasing in their Making Tax Digital programme and transform the current tax compliance landscape.
This will result in a significant change to the way that businesses and individuals need to keep their records and report figures to HMRC, and could create a significant burden on many small businesses who at present do not use an electronic system for maintaining their business records.
Under the Making Tax Digital programme HMRC will require information to be reported online on an at least quarterly basis using specialist software. This information will be fed into an individual’s personal tax account which will then be available via the Government Gateway.
The new rules are certainly a significant change to business record keeping and gives a strong indication of what direction HMRC are looking to move towards in the future. Paper accounting records will no longer be sufficient to meet the requirements of tax legislation, so those who do not currently have an electronic system in place will need to ensure that an appropriate system (which includes spreadsheets) is put in place in the near future.
Who will be affected and when?
The new rules will be introduced over the coming years, starting in April 2018 with unincorporated businesses and landlords with turnover in excess of the VAT threshold.
This will be extended to unincorporated businesses and landlords with turnover above £10,000, together with VAT reporting from April 2019.
Finally, from April 2020 the provisions will apply to limited companies and for Corporation Tax reporting.
HMRC have not yet published final details on exactly how Making Tax Digital will operate, or exactly what exemptions will be available.
Advance planning will be key to ensure that your systems are able to deal with these changes, and we would strongly encourage you to take action now to ensure that you are fully compliant when the rules take effect.
As with most things, HMRC will be imposing penalties for non-compliance so it is vital that the new legislation is not ignored.
How can we help?
We have extensive experience in dealing with cloud based bookkeeping systems and can assist you in maintaining and submitting your records as required by HMRC.
If you are not currently maintaining your records electronically we can assist you with choosing an appropriate system and implementing it within your business.
If you would prefer to have all of the hassle of Making Tax Digital taken away from you, we offer a bespoke bookkeeping service to deal with everything for you so that you can focus on managing your business. This fully managed service often comes at a significantly smaller cost than employing a full time bookkeeper and invariably results in the production of superior management information.