July 2016: Making Tax Digital
There are a number of initiatives that the HMRC want to implement over the next few months and years. One of the main projects on the go at the moment is Making Tax Digital. While the Brexit decision may delay the plans somewhat, the general consensus is that this will go ahead and we will start to see some changes to the way we communicate with the HMRC and pay our taxes in the near future.
This is the biggest change that we will see since the introduction of Self-Assessment and here are the key points that the HMRC want to achieve:
- Remove the need to complete a tax return by 2020
- Move the tax system online
- Introduce quarterly reporting for accounting data for businesses and landlords
This may mean that for some of you there will be a few changes in the way that you do your day to day accounting. If you are not already doing so, an online bookkeeping system may be a practical place to start in order to adjust to the changes to come.
We are not too sure how this will be implemented across the spectrum of businesses that we see. A number of our smaller clients use excel spreadsheets for their business, as quite frankly, that’s all that’s needed. We also question the frequency of the reporting (proposed as every quarter) and are concerned that this may add to the workload of already busy business people. Another aspect that is not clear to us just yet is how the HMRC intends to collect the tax due as individuals will still need to submit some form of reporting and therefore what will replace the tax return?
What we do know is that it is still early on in the project and there are a number of questions that the HMRC are going to have to address before this can be an efficient model in which to work from. We’ll keep you posted on any new information we have and will continue to work closely with our clients to ensure that any transitions necessary are as pain free as possible.