The tax reporting system is set for digitalisation. It seems logical, in an age of technology that HMRC want to modernise the tax system, hooray we say but what does this really mean?
Unfortunately, we don't know, no one knows and there's only very limited guidance provided by HMRC. The government announces its proposals for Making Tax Digital (MTD) in 2015, what we do know, is that all businesses (and individuals), incorporated and unincorporated) will need to keep records in a digital format on a timely basis and then report quarterly to HMRC.
However, there still will be an end of period statement which includes the final figures (and any accounting adjustments) and then a final declaration.
So rather than simplifying tax as legislation suggest, we're talking 6 submissions instead of one. It looks like this new legislation will come into effect from April 2018 for unincorporated businesses and individuals.
Seeing as the implementation deadline is only around the corner, we need to be thinking about what can be done to prepare. For those of you already using accounting software such as SAGE, QuickBooks Online (QBO) and Xero, you will be in a good place to be able to comply with the new legislation (so long as software providers are able to write the coding in time to enable filing capability).
The cloud based offerings will be quicker and easier to adapt to the new requirements and so if you're not using accounting software then now would be a really good time to have a look at something cloud based like QBO or Xero. Both are user friendly, directly link to your bank information and keep your records up to date in real time.
In addition, there may well be amendments you will need to make to your accounting procedures depending on how comfortable you are making direct submissions to HMRC or if you need support from an accountant. Keep in mind that at this stage how MTD ties in with VAT reporting is still an unknown.
MTD is currently one of the most contentious areas in the industry with professional regulatory bodies such as the ACCA, ICAEW, CIOT all raising serious concerns about the intended implementation plan for MTD.
As we write, the MTD implementation fate has not been confirmed 100%, but rest assured whatever is held in store when the details are published that we can support you whether it's with your transition to cloud accounting or MTD reporting requirements.