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Advice On Making Tax Digital

BJG Accountancy Braintree Essex

I suspect that for many small businesses. the planned roll out of the Digital Tax plans by HM Revenue and Customs has been filed under ‘bureaucratic reorganisation which does not affect me.’

In addition, it is probable that the whole subject has not been regarded as relevant by those individuals who are required to submit a self-assessment tax return.

However, it is important to note that any individual who is required to submit a tax return by virtue of being self-employed or has property letting income, and has annual income in excess of £10,000, is required to register for the digital tax scheme. (The criteria also include those individuals in employment with additional income in excess of £10,000).

This is of course in addition to incorporated businesses.

The main impact will be on those individuals and small businesses who do not currently fully use software to maintain their accounting records. HM Revenue & Customs will require all those affected to keep digital records of their income and expenditure and submit in an acceptable format such digital records to HM Revenue & Customs in quarterly updates.

It should be noted that HM Revenue and Customs will not be providing their own free software to facilitate the Digital Tax requirements – therefore it is important for those affected who do not currently use commercial bookkeeping/accounting software to start researching the most suitable and cost effective software solution for their needs. The current proposal are for software companies to be required to provide a free version, but this is likely to be fairly basic (eg will it include VAT calculation ?)

HM Revenue & Customs clearly anticipate that with the improvement in design and security of cloud based bookkeeping that there will not be major problems in implementing the scheme, in the sense that all that will be required is access to the internet and that installation of software on the taxpayer’s computer will not be necessary.

Some will say that this is an optimistic scenario, particularly as the system (originally due to come into operation from April 2018) is now delayed until April 2019 (for non-incorporated businesses with turnover in excess of VAT threshold).

The other proposed deadlines for implementation have now been postponed to April 2020 for the following :

  • Self employed individuals and landlords with turnover below VAT threshold but above £10,000.
  • Incorporated businesses.

For those businesses already using commercial software the changes should be less onerous, as the software provider should be providing a relatively painless update to facilitate the submission of electronic records, although it is yet to be seen what additional costs they will attempt to pass on to the customer.

On the plus side, for any taxpayer affected who uses or intends to use an accountant/agent, the agent in question should be able to retrieve from HM Revenue & Customs electronic data relating to PAYE income, pension income, Social Security benefits and other information, which means that loss of paper documents should not be such a stressful situation and should also save time for all concerned.

I hope that gives a general overview of the changes on the way and the affect that they will have.

For further advice and assistance on your bookkeeping needs please contact BJG Accountancy on info@bjgaccounatncy.

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