Making Tax Digital – a brief guide
As a nation, our connection with digital services is interwoven within our day-to-day activities. The apps on our phones give us information on how busy our commute is, live updates on bank balances, advice on what shopping we need to order for the coming week, and business tools such as where staff are working, and tracking suppliers and materials. So having real-time information on our taxes is just the next step, right?
For those who are not aware, HMRC is digitising the tax system in what is the largest shake-up of the personal tax system in a couple of decades. The aim is to ensure that the process for taxpayers is simplified, and to develop a more efficient tax system with the better use of information. The programme will be rolled out with some groups such as smaller housebuilders and developers being one of the first to be involved.
The project has been named ‘Making Tax Digital’ (MTD), and will apply from April 2019 to unincorporated businesses and landlords with turnover above the VAT threshold (currently £85,000) in relation to VAT only. The direction of travel is for the entire tax system to be fully digitised, and we should expect to see further businesses come into scope from 2020 onwards. There are three steps to take now to ensure you are well prepared for the transition:
1. Obtain your Government Gateway account
HMRC is already collecting real-time data, and this can be found at www.gov.uk/personal-tax-account. With the onus of switching to the taxpayer to ensure that the correct taxes are being collected, it is crucial you can access your account.
2. Assess whether your record keeping methods are adequate for the new reporting structure.
Having a paper file of receipts alone will no longer be acceptable. Information must at least be accumulated on a spreadsheet which can then be uploaded using specialist MTD software.
3. Consider whether an online accounting product is suitable for your business.
The decision to go digital should not just be from a compliance standpoint. There are online products in the marketplace and apps to support their use across many business sectors, helping to save time and money.
These steps may introduce further queries, which we would be happy to help you with. Whilst there are no penalties formalised at this point, they are likely to manifest after the bedding in the process has been completed, so it would be wise to ensure you have adequately prepared in advance.
One thing is for sure, and that is there is no time for complacency. There may be a couple of years of transition time to keep records digitally, but with other challenges such as Brexit looming, it is well worth preparing for.
In this world, nothing can be said to be certain, except death and taxes. Well, taxes just got a
bit more uncertain, unless you act now.
We periodically send out complimentary newsletters, click here to receive yours.
Subscribe to our newsletters
Our complimentary newsletters and event invitations are designed to provide you with regular updates, insight and guidance.
You can unsubscribe from our email communications at any time by emailing email@example.com or by clicking the 'unsubscribe' link found on all our email newsletters and event invitations.