It seems that the government is finally pushing all businesses into the 21st Century after declaring that it will soon be mandatory for every business to keep their records in a digital form. Goodbye spreadsheets, hello digital reporting.
So, what has the government actually said?
As part of the government’s Making Tax Digital plans, it will be compulsory for every business and landlord to use some form of accountancy software that has the capability to communicate with HMRC’s systems. For technophobes or for businesses that either have their own accountancy software or rely heavily on excel spreadsheets, this is unfortunately going to mean extra costs and hassle as all data will need to be transferred to the new software.
This is a huge step that will affect small businesses, the self-employed and property owners who need to begin keeping regular digital accounts. As of yet, there is no clear guidance on what information will need to be transferred to HMRC via the software, but it is clear that end of year tax returns will be removed and instead individuals and businesses will need to submit their digital records ‘at least’ quarterly each year.
The government has introduced digital reporting with the following four intentions:
- To simplify tax by showing taxpayers upfront the information HMRC has for them
- To keep tax in one place, giving taxpayers an overview of their liabilities and entitlements
- To clarify tax for businesses, no longer will businesses need to wait until the end of the tax year to see how much tax they will need to pay
- To clarify tax for individual taxpayers, through interacting more regularly with HMRC individuals will have a personalised picture of their tax affairs
Who will be affected?
- All companies
January – June 2016, five million small businesses and every individual taxpayer will have access to their own digital tax account, seeing information HMRC holds about them.
July 2018, most businesses, self-employed and landlords start updating HMRC quarterly for income tax and National Insurance obligations through their accounting software.
From 2019, most businesses, self-employed and landlords start updating HMRC quarterly for VAT obligations through their accounting software.
From 2020, most businesses, self-employed and landlords start updating HMRC quarterly for Corporation Tax obligations through their accounting software.
For a more detailed timeline, click here.
How we can help?
We have been ambassadors of cloud accounting for the last five years and we knew it was only a matter of time before digital reporting was made compulsory. Indeed, we understand the difficulties of transferring to a new accountancy system, but that is why we have launched our Cloud Team. Our Cloud Team creates bespoke packages for our clients and through our ‘eight week enablement programme’ our team will help you get started with cloud accounting, providing all of the training you need and being available at any time to support you with the software. Therefore, we can guarantee that by 2018 you will be compliant with the new reporting requirements set by HMRC.
To find out more about our Cloud Accounting service and how we can support you, please contact me at email@example.com.