By 2019, the government’s Making Tax Digital for Business initiative will start to affect businesses across the nation, completely overhauling the way that tax is currently paid.
Initially introduced by George Osborne in 2015 as a way to reduce the tax administration burden on individuals and businesses, the Making Tax Digital regime will require all businesses to report their tax online on a quarterly basis.
When will it begin to affect me?
From April 2019, VAT registered businesses (including self-employed and landlords) with a vatable turnover above the VAT threshold (currently £85,000) will have to:
- keep their records digitally (for VAT purposes only)
- provide their VAT return information to HMRC through Making Tax Digital compatible software, using new HMRC API’s
The government will not widen the scope of Making Tax Digital beyond VAT before the system has been shown to work, and not before April 2020 at the earliest.
How can I remain compliant?
Businesses and individual taxpayers will have to register with HMRC to use the new system. They will then have access to pre-populated information and can make submissions or updates at any time.
A cloud accounting package can help you to make a seamless transition to the new regime, but isn’t just useful for the new tax regime. While cloud packages allow you to make accurate submissions, they also offer real-time information about your accounts, so that you know exactly where you stand at any time.
If you’d like to transition to a cloud-based system, we can talk you through the options. We are proud to be a Xero gold partner and support Sage Business Cloud. These are our preferred software packages, but we will support others such as Quickbooks and Sage 50c if that is your preference. We set the system up for you and provide full training so you can make the most of the information at your fingertips.
What happens next?
We are working with our clients to ensure that an efficient structure and plan, taking advantage of the benefits of the technology, is put in place ready for the start of the legislation, and we are keeping them up to date with all of the latest information. Our recommendation would be to consider making the change at the earliest point in order that you can understand, utilise and report accurately from your chosen system prior to the required start date. We would also recommend considering what information you require reporting on to help achieve your goals in order that the chosen system can be set up in the correct manner.
If you are concerned about Making Tax Digital or would like to make the transition to a cloud-based package ahead of its introduction, please contact us by calling 01242 776000 or by completing the contact form below.