Kristian Corbisiero – Digital Accounting Project Leader
Digital Tax Initiative On The Horizon
Despite a slight delay as a result of the snap general election, proposed plans by HMRC to introduce one of the world’s most digitally advanced tax systems could begin this year, with a pilot scheme potentially going live in April 2018.
All accountants will have to introduce digital accounting systems for their clients to comply with the Government’s new ‘Making Tax Digital’ initiative (MTD).
Under the proposed plan businesses will be given at least 12 months to prepare for the transition to digital tax accounts. Businesses, self-employed people and landlords will need to submit quarterly updates to HMRC. Keeping of digital records will be phased in by 2020. The plan is to start with quarterly reporting for landlords and the self-employed, with micro businesses next to come online. Starting with income tax for businesses with annual turnover above the VAT threshold then extending the income tax elements of MTD to all businesses, followed by VAT and Corporation Tax.
The Government has already pledged to remove the smallest businesses, self-employed people and landlords from the scope of the changes by exempting all those with annual turnover of less than £10,000. This is in addition to those who were already removed from the scope by the exemption for secondary income below £10,000.
Kristian Corbisiero – Digital Accounting Project Leader at Bevan & Buckland Chartered Accountants added that “The UK is lagging behind other European countries with its lack of progress with the digital submission of tax information. HMRC are pushing ahead with the original schedule of MTD to become compulsory by April 2018 but is yet to be finalised and the 2017 Finance Bill has thrown even more doubt into its future.”
The biggest challenge for an accountant will be getting clients who traditionally have completed their bookkeeping on paper or on spreadsheets to convert to digital accounting.
How do you (the client) prepare for the change?
One of the most noticeable changes for businesses is the need to use digital software to keep both company and individual records up to date.
A business survey carried out by the ICAEW found that 75% of respondents were not using software to maintain their accounts.
Businesses will be able to use spreadsheets to collate records but they must ensure that the documents are compatible with the software available.
It is the business’ responsibility to choose software that both suits their needs and is compatible with the HMRC digital tax account system.
If the client prefers not to do this themselves their accountant can do the bookkeeping for them. This will come with an additional cost and by speaking to your accountant you can discuss the best package for your business.
If you want to know more or have any questions on Making Tax Digital please call Bevan & Buckland on 01792 410100 or email email@example.com