Making Tax Digital
The UK government is introducing big changes to how tax is filed to make it easier for individuals and businesses to get their tax right and stay on top of their tax bill. This should reduce the end of year rush to file a tax return and enable people to stay on top of their tax bills throughout the year.
Businesses and people now have access to digital tax account with HMRC so they can monitor their own tax affairs much more easily.
The new Making Tax Digital system will come in to force from April 2019 for VAT obligations, and will only apply to businesses over the VAT threshold (although smaller businesses may use the system voluntarily). In the future Making Tax Digital will expand to Corporation Tax and Personal Taxes.
There are a number of aims that HMRC hope to meet by Making Tax Digital. The first is better use of information, individuals and businesses will have better control over the information held to ensure that it is correct and HMRC will be able to combine information from multiple sources to reduce the need for providing the same information multiple times. Making Tax Digital will also enable tax in real time, rather than waiting for the end of the year to submit information this will be done throughout the year reducing errors and stop tax due or repayments building up. Further benefits come from providing people with a single financial account of all their tax liabilities and entitlements to get a clearer view of their overall position. Finally, there will be more digital interactions with HMRC, enabling people to manage their tax affairs at a time that suits them.
Making Tax Digital for businesses
Making Tax Digital will require that businesses manage their bookkeeping digitally, maintaining their records on an accounting system that can link with HMRC. Most businesses already use software for their day to day activities, either themselves or through bookkeepers. If businesses are not using an appropriate digital system they will need to transition to one before April 2019. This is best done at the end of the businesses financial year or the end of a VAT quarter.
If you need help moving to an appropriate system please get in touch with us at 2 Sisters Accounting and we will advise you on your options for transition.
Since the first part of the Making Tax Digital only impacts VAT businesses will not have to provide information any more regularly than they do now. VAT has been online since 2010 and the vast majority of businesses submit VAT returns online in any case. Making Tax Digital will build on the current system by integrating digital record keeping to provide a single process with quarterly updates generated and sent direct from the software the business uses to HMRC.
Further changes to Making Tax Digital will not be implemented until the system has been shown to work for VAT and at the earliest April 2020. If you want to check your obligations under Making Tax Digital and how it might affect you please get in touch with 2 Sisters Accounting and we will be happy to help.