Making Tax Digital – The Road Ahead
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. In this article, Elaine Cromwell, an accounting software specialist and Partner at Thomson Cooper Accountants, tells us what this means for business.
Back in July 2017 when many of us were enjoying the height of our Scottish summer (I think it got to about 20 degrees that day – I remember because I removed my cardigan briefly), HM Treasury and HM Revenue & Customs (HMRC) published its second Finance Bill of 2017 which included changes to the proposed Making Tax Digital initiative.
Taking on-board feedback from the business community and finance professionals, the government announced amendments to the original road-map which had initially envisaged all but the smallest businesses reporting income and expenses on a quarterly basis to HMRC from April 2018.
Introducing a new digital tax system is still the right direction to move in says HMRC, but for the time being Making Tax Digital will mean:
- Only VAT registered businesses will need to keep digital records and only for VAT purposes.
- They will only need to do so from April 2019.
- Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until April 2020 at the earliest.
So what does this mean?
If you are VAT registered then you need to move to digital record keeping (i.e. use software to record your accounting transactions) in time for April 2019. This will be optional, although I suggest desirable, for non-VAT registered businesses.
If your business is not already using software (and by that I don’t mean Excel – it won’t count unless it can integrate with HMRC’s systems) then you want to start thinking about solutions now. The good news is that there are many good, reliable and affordable options available. You’ll need time to evaluate the best solution for your business – desktop, installed software or cloud for example, and the space to plan your transition onto a new platform.
It need not (and should not) be just about becoming compliant for Making Tax Digital. It’s a good opportunity to review your business processes and look at making the most of new features and technologies which can help you work faster and smarter. Many businesses are already seeing the benefits of moving onto feature-rich, online accounting solutions which integrate with a whole eco-system of other apps allowing business owners to streamline the entire business, not just the accounting function.
Although April 2019 might seem a fair distance off yet, we all know how quickly deadlines can appear, looming like great juggernauts on our horizon. My advice is to act soon and make your plan so you can avoid any pitfalls or potholes on the road to Making Tax Digital.
For more information or advice on Making Tax Digital, please get in touch with Elaine Cromwell on 0131 226 2233 or visit www.thomsoncooper.com.