So What Is Making Tax Digital?
The Government started this process for businesses with the introduction of real time information for employers payrolls in April 2013. Every employer had to submit payroll records digitally to HMRC rather than by paper, as they had previously been able to do. This change overall has worked and since then they have been keeping their eye on bringing this in across the whole range of ways in which taxpayers provide details to HMRC.
There is to be an introduction of a “real-time” tax system meaning that instead of reporting information on tax returns and paying liabilities long after the end of the tax year, you will be able to see a real-time view of your business tax affairs and liabilities through your digital accounts. This should make it easier to understand how much tax you owe and to budget accordingly. This will mean updating HMRC quarterly for income tax and National Insurance liabilities through accounting software.
If Making Tax Digital applies to you, you’ll be required to use digital tools, such as software or apps, to keep records of your income and expenditure. HMRC has stated that it won’t provide its own software, but will ensure that basic apps and software products are available for businesses with “the most straightforward affairs”. Many other businesses and their accountants, however, will choose to use more comprehensive commercial software.
So what should you be doing to prepare for this?
Keep an eye on the news for any further delays, as HMRC have delayed this a couple of times already since it was announced. This will happen however, so start to review what your procedures are for maintaining your accounting records digitally.
Speak to your accountants – Cardens are able to advise on a number of cloud accounting software options, as well as handle the requirements of Making Tax Digital via it’s bookkeeping and outsourcing department.