*Update July 2017*
From 2019, only businesses with a turnover of over £85,000 will have to keep digital records for VAT purposes, and from 2020 for any other taxes. Vat registered businesses need to file quarterly returns anyway, so this will not affect frequency of filing for these businesses.
Smaller businesses can adopt digital records on a voluntary basis.
Original article
When it comes to the Tax man, it never really made sense to me why there was such a delay between the actual accounting year and the deadlines for calculating and paying tax. For me personally, the introduction of a digital tax experience is long overdue.
In the UK, £8 billion of tax goes uncollected each year due to errors and carelessness and the new system aims to provide one account which links all government internal systems. Eventually, digital record keeping systems will be linked to HMR&C systems and information will be sent directly between the two.
Another benefit will be the quarterly updates to HMR&C so that business owners will have a real-time overview of their tax liabilities for the year, rather than a surprise tax bill at the end of the year (or the following year).
Putting aside the NIC announcement in the Budget, there was also an announcement that the government will be allowing small businesses another year (until 2019) to comply with digital record-keeping.
The timetable for the gradual introduction of the changes is now as follows :
2018 |
Income Tax (turnover above the VAT threshold) |
2019-2020 |
Income Tax (turnover above £10k) |
2019 |
VAT |
2020 |
Corporation Tax |
2020 |
One single account for all taxpayers to see all liabilities and entitlements |
Companies with a turnover of less than £10k will be exempted from the changes.
Each of the changes will be introduced gradually via pilot schemes.
As we move forward to a mainly digital experience, with shopping, banking and many other tasks being carried out online, it seems long overdue that the government follow on with a digital tax experience.
In preparation for this, I have decided to move my spreadsheet-based accounting to on online software system from April 1st 2017, and have also suggested this to some of my clients. Personally, I have signed up to use www.waveapps.com as it is free and I had heard recommendations for using it. Other such providers include Xero, Quickbooks and Clearbooks, amongst others, but some of these involve a monthly payment. It would be wise to start looking into the options available ready for the deadlines in 1-2 years.
For more information on Making Tax Digital visit https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital.
