We are told that the Government wants to simplify the tax system and help individuals and businesses to keep on top of their affairs. But what impact will this have on your business?
Making Tax Digital (MTD) will require taxpayers to keep timely digital records of all business transactions and these will be sent directly to HMRC on a quarterly basis. This will be introduced in phases – from April 2019, VAT registered businesses will have to meet new requirements for VAT. For all other taxes, the earliest requirements will be April 2020.
‘Making Tax Digital will help businesses get their tax right first time,’ said Jim Harra, director general of customer strategy and tax design at HMRC. ‘It will help reduce the likelihood of errors, lower the chance of compliance checks and give them greater certainty that they are getting things right.’
We are told that it should be a breath of fresh air, as you will no longer have to provide HMRC with the information that they already have on record – date of birth, NI number, taxed earnings for the year, savings interest, etc. Just imagine not having to root around for all those numbers each year!
It will also mean you don’t have to wait until the end of the tax year to understand your tax position, as it will be a live system just like online banking. This should mean the end of hefty over or under payments at the end of the tax year and help you plan for any tax bills.
Personalised tax accounts already exist for businesses and individuals. Log into your business or personal tax account through the Government Gateway and you will see a dashboard of all relevant taxes.
Remember that from September 2017, HMRC made it a requirement for all businesses using their online tax account to register for two-step verification to improve the security of your account. This will require you to enter a code sent directly to a mobile of your choice to log in.
To summarise: if you are VAT registered you will need to comply with MTD from April 2019; other taxes will be included in a phased schedule, no earlier than April 2020.
It is, however, worth creating the right habits sooner rather than later and exploring digital systems through commercial software providers. We at Milestone strongly suggest that this choice should be the Xero platform as this is already compliant with MTD and will allow you to make better decisions about your business.