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Digital tax accounts for businesses: what we know so far

 

Digital tax accounts for businesses: what we know so far

"I'm going to have to start using expensive software to keep my accounts."

"It's the end of the tax return."

"I'm going to have to spend even more time doing admin rather than running my business."

These are just some of the concerns we've heard about the government's plans to make tax administration digital by 2020. The Making Tax Digital project encompasses everyone who has to submit a tax return – from sole traders to landlords and larger businesses.

The aim is to make the system easier for everyone but like many large-scale initiatives it can be hard to get to grips with how it will affect you. 

In this blog post we take a look at how the changes will impact businesses.

What's changing?

Businesses will have to keep digital records of income and expenditure and send HMRC updates each quarter from their software.

They will also have to send a round-up at the end of the year.

Rollout

When the changes come in will depend on your turnover and which taxes you are liable for.

Another complication is the impact of Theresa May's decision to call a general election. Clauses relating to Making Tax Digital were removed from Finance Bill 2017 in order to get it passed before parliament was dissolved.

The clauses are likely to be reintroduced in another bill, although this will depend on who is in government after 8 June.

The table below shows the current timeline.

 

Date

Turnover

Tax

April 2018

Turnover over VAT threshold

Income tax and national insurance

April 2019

Turnover below VAT threshold

Income tax and national insurance

April 2019

Anyone who is VAT registered

VAT

April 2020

Anyone who pays corporation tax

Corporation tax

http://www.accountingweb.co.uk/tax/hmrc-policy/mtd-law-shelved-in-wash-up

Exemptions

Anyone with a turnover of less than £10,000 is exempt from the new rules.

In addition, anyone who can't get online (due to a disability, for example) will be exempted for Making Tax Digital.

Software

HMRC has not published a list of which software will be compatible with Making Tax Digital so it is difficult for us to give specific advice at the moment.

We know software vendors are working closely with HMRC but we're still waiting for more concrete news.

In the meantime, there are 2 areas businesses will need to plan for:

 

  • potential cost of purchasing software 

  • time to train staff how to use the software.

This blog gives a brief overview of what is changing. Talk to us for more detail and to discuss your situation.