You may have heard of this latest new initiative from HMRC sometimes referred to simply as MTD – here we look at what this is and how it will impact you and your business.
Cast your mind back to 1997. You were probably making calls on your Nokia 3110, watching TV on a newly released flat screen TV, getting someone to install this new-fangled piece of technology called wi-fi and if you were lucky enough to get your hands on one, listening the The Verve on an MP3 player.
Times change, technology moves on and we are well and truly in the digital age. How many companies now have a twitter and Facebook page along with the run of the mill website? People like to promote their business through any channel that gives them a social media presence.
When it comes to tax, it seems we are still stuck in 1997. Why do some businesses still use an excel spreadsheet to complete their income and expenses? It really is time to move on and embrace what is on offer. Completing your accounts on line is going to be mandatory from April 2018 for the self employed and property landlords. And it is going to have to be done every quarter with an end-of-year tax declaration to HMRC due by Jan 2020 in the usual way.
There is good news !
1.This regular reporting will encourage tax payers to ensure their affairs are up to date on a regular basis and have more visibility of the tax bill accruing over time.
2.Tax payers and landlords with rent under £150,000 will be able to use the cash basis to prepare the accounts.
3.Voluntary payments of tax can be made towards the tax bill which avoids the pain of the bulk payments being due in July and January.
4.Businesses with turnovers less than £10,000 per annum are likely to be exempt.
5.There will also be a deferral of one year from HMRC penalties to allow businesses to manage the transition into regular filing.
6.HMRC have recently confirmed that businesses will be able to continue to use spreadsheets but they need to be compliant with MTD and integrate with software.
7.It is also likely that sole traders who are not VAT registered will be able to continue to file 3 line accounts in the quarterly returns (turnover, expenses and profits).
What you should do now
Making tax digital is a reality and is heading your way so why not use this time to get yourself accustomed to a cloud based package? The market for these packages has increased significantly over the last 2 years with Xero, Freeagent and Kashflow to name a few. HMRC have estimated that the transitional cost per business should be around £280 but many of the cloud based packages we work with cost less than this with our accredited partner discounts.
Free software will apparently be made available to businesses with the most straight forward affairs but in our experience, these can be the clients who are least familiar with technology.
Provided business owners are running their business through a dedicated bank rather than through a personal account, much of the data entry can be automated by using the bank feed facility that many cloud based packages come with.
Further information on the benefits enjoyed by all from cloud based solutions can be found here .
Does this mean our role as your accountant will become non-existent?
Here at C&M Accountants we are already embracing the on-line world – our secure online portal, app and cloud based accounting platforms are just a few examples of how we are always looking at ways to work smarter with our clients. We support our clients to use these tools and offer free training on the accounting platforms at our office with coffee and biscuits on hand!
The increased use of clients using cloud based platforms mean we have access real time to their data meaning we can be more proactive – providing early feedback on financials, dividends that can be taken and identifying any potential issues.
To sum it up, going online isn’t a scary beast. It’s part of the technology revolution. Isn’t it time you and your business benefitted from these time saving tools and got ahead of the game – Making Tax Digital is coming – embrace it sooner and it will be an easy transition with us on hand to smooth the way.