By Cheaper Accountant, Oct 1 2017 07:43AM
This blog post is the first of a series of artilces that we will publish on HMRC's "Making Tax Digital" or MTD. There has been a number of developments in this area during recent months and this series of articles that will be published on our site over the coming days and weeks will focus on introducing MTD, what MTD means for you the reader and will provide details and guidance on the most up-to-date developments relating to MTD.
Introduction to Making Tax Digital
The Government has committed itself to a digital revolution and to fundamentaly reform the way in which the tax system operates. This is a somewhat ambitious agenda which initially targeted the year of 2020 for full implementation. The aim of MTD is to simplify the tax system for tax payers and effectively improve the user experience for millions of taxpayers. A fully digital tax system in 2020 is expected to address the following three aims:
1. Removal of form filling and a closer connection to real-time information;
2. Removal of time delays as the tax system operates on a closer to "real-time" basis;
3. Increased access to digital accounts underpinned by the seamless upload of information.
This may mark the end of the tax return for both individuals and businesses and only time will tell. Businesses and individuals can expect to file and update electronic records held with HMRC at any time and in real time. The aim is to collect tax quicker and more efficiently. Rather than making annual tax payments, companies and individuals are likely to need to pay tax on a more regular basis just like you would if you fell wihtin the PAYE tax system. The regular updating of information filed with HMRC is likely to come at a cost. This is where you may wish to engagement a more affrodable accountant for your accountancy work and we can certainly help you here.
It was initially stated that a number of businesses, including the self-employed and property landlords, may be required to update HMRC at least quarterly from April 2018. This appears to be quarterly business accounts which will underpin quarterly electronic tax calculations (possibly replacing the annual tax return) with quarterly payments of tax being likely. These quartely updates are expected to be completed electronically and online. This seems to be similar to the Payroll Real Time Information and the changes that were made to the filing of employer payroll information.
Small business owners will need to ensure that all bookkeeping is performed on a regular basis so that quarterly filing requirements are not overlooked. You are likely to need an accountant to help you with these new quarterly duties and an accountant could be needed to submit the lodgement to ensure that everything is accurate and correct from a tax perspective. This may result in four significant payments of accountant fees and small business owners will need to be vigilant when engaging an accountant as these fees could certainly mount up across a twelve month period.
Like I said earlier, this is the first of a series of blog posts on the topic of making tax digital and we hope that you find this information useful and it provides food for thought as you move forward wih your company accounting.