Digital tax revolution
In every walk of life, people are embracing the digital revolution – and the tax system is no exception, says Rawlinsons Tax Manager Craig Tolliday
Taking Tax Digital (MTD) was first announced in the March 2015 Budget, as part of the Government’s plan to modernise the tax system, and make it easier for businesses and individuals to deal with their tax affairs. This will result in the end of the annual tax return, transforming tax administration so it is more effective, more efficient and easier for taxpayers. Instead, taxpayers and their agent’s will have access to information which HMRC hold on their behalf (via the ‘digital tax account’), and will need to confirm and/ or provide certain data to HMRC digitally. Some of this information may also have to be reported on a quarterly basis to HMRC.
HOW WILL IT WORK?
Quarterly updates: Summary details of income and expenses will need to be submitted at no more than quarterly intervals. For those who complete VAT returns, it is intended that the submissions can be aligned. There will also be a separate end of year activity update, which will be used to deal with any necessary accounting and tax adjustments. Voluntary Pay-as-you-go: Taxpayers will have the option to pay their tax on a payas- you-go basis, which will be based on the quarterly figures submitted to HMRC. Aside from this, HMRC have suggested there will be no changes to tax payment deadlines, at least for the time being! Digital record keeping: HMRC are introducing the requirement to keep digital records. This will normally be via specific software, which will link directly with HMRC for the purpose of submitting the data to them. Whilst this may include spreadsheets, it is currently suggested there will be no method of uploading or sending data to HMRC directly from spreadsheets and, as such, any data will need to be fed through other software linked with HMRC.
In an announcement in July HMRC confirmed the new timeline for Making Tax Digital (MTD). The update stated that MTD will definitely come into force, but that HMRC has listened to the concerns of businesses and accountants surrounding the pace of the change, and has therefore delayed its implementation. Under the new timetable, only businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records (for VAT purposes only) and will need to do so from 2019. Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020. MTD will also be available on a voluntary basis for the smaller businesses, meaning that those with turnover below the VAT threshold will be able to choose when to move to the new digital system. This will ensure that all businesses have time to adapt to the changes.
WILL I BE AFFECTED?
To summarise, keeping digital records and updating HMRC quarterly will apply to all businesses, self-employed persons and landlords with turnover in excess of the VAT threshold. Smaller businesses will be able to use the digital system on a voluntary basis if they wish. Also under current proposals, there will be exemptions from the reporting requirements from Charities and Community Amateur Sports Clubs (CASC’s). individuals who currently complete self-assessment tax returns, returns will eventually be removed and taxpayers will be required to check, confirm and correct information held on their digital tax account.
HOW WE CAN HELP
Rawlinsons is fully committed to supporting clients through the transition to Making Tax Digital and will continue to provide updates and reminders. A series of seminars on MTD and cloud accounting solutions will start this autumn.
To review your options on digital record keeping please visit Rawlinsons’ cloud accountancy services.
T: 01733 568321