Making Tax Digital
Making tax digital – the end of the annual business tax return?
Have you heard about the taxman’s plans to abolish the annual tax return for businesses with an income of £10,000 or more?
It’s part of a raft of measures called ‘Making Tax Digital’ (MTD). The idea is that, instead of sending the taxman an annual return, you keep electronic records that ‘push’ all the information HMRC needs to work out your tax liability.
Many small businesses have looked at the proposals with dread, worried that they will get lumbered with more red tape and have to undergo the hassle of switching to digital accounting records.
Many organisations such as the Federation of Small Businesses have been lobbying HMRC to temper their proposals to avoid putting extra burden on businesses. This has caused HMRC to clarify its proposals.
Writing in the Financial Times on 10 November, HMRC spokesman Jim Harra wrote:
HM Revenue & Customs will not be asking anyone to file accounts five times a year, nor will we be introducing in-year quarterly payments. Businesses will simply send in-year updates to HMRC using information collated automatically by the same software used to record day-to-day transactions. This will help businesses pay the right amount of tax, taking away the need to put things right at a later date.
Businesses already keeping their records digitally should see no additional costs at all. Free software will be there for businesses with the most straightforward affairs, and we are looking at additional assistance by covering transitional costs.
We fully recognise that this is a significant change for some businesses, which is why we’re introducing it gradually as well as exempting some of our smallest businesses, but at the heart of digital transformation is a simpler, more efficient tax system that frees business people from red tape and form-filling.
Based on our past experiences of HMRC’s digitisation of systems, there may well be delays in the implementation of MTD, but the taxman does seem to be resolute in his intention to scrap the annual tax return and have us upload data in order to quantify our annual tax liabilities.
If you would like advice on how to get ready for MTD, or help in choosing an accounts system that will comply with HMRC’s MTD requirements, please get in touch – we’d be very happy to help.