On the 15th August 2016, HMRC published one of their most controversial consultation documents in recent times, Making Tax Digital!
The proposal put forward by HMRC is that from 2018 all businesses, the self-employed and landlords will be required to use software to maintain their business records and transmit this information to HMRC on a quarterly basis, rather than once a year on a personal self-assessment tax return as currently happens.
Why is tax going digital?
HMRC’s vision is that tax will operate more closely to ‘real time’ and that we will be in a position where a taxpayer should never have to tell HMRC information that it already knows. In other words, information that HMRC needs will be automatically uploaded to a digital account. All tax information will then be in one place bringing an end to the tax return. Of course, this ‘real time’ account will also mean that tax can be paid based on business activity during the year rather than on estimates based on the previous years trading.
What are the key issues to consider with making tax digital?
• Digital skill – Do all businesses have the digital awareness to be able to implement making tax digital, many may struggle.
• Cost – The cost of implementing a new accounting system can be significant particularly to the micro business.
• Time – Does a small business proprietor have the time available to be implementing a new accounting system particularly when they already have one in place (maybe excel spreadsheets) that is working sufficiently well.
• Additional work – Will businesses now need to provide HMRC with information four times a year rather than once?
Whatever happens with Making Tax Digital we here at Stafford based Accountants Cheadles are ready and waiting to help. We are partnered with cloud accounting software provider Xero to be able to offer our clients the benefits of the cloud for simpler processing of the quarterly tax statements. We also have a range of other accounting solutions available so that our clients are able to choose the best and most cost-effective solution for them.