SJM Accounting Services Cheadle, Stockport 07778 590056
SJM Accounting Services           Cheadle, Stockport                     07778 590056

What is 'Making Tax Digital'?

This is a term that will become more emphasised over the following months and years. ‘Making tax digital’ is an attempt by the government to modernise the UK’s tax system. Initially announced in the March 2015 budget, it was planned to be in place for a wide range of taxpayers, including businesses, the self employed and landlords by April 2018. It is planned that the system will be completely rolled out by 2020. During the spring budget 2017 the Chancellor announced that businesses with a turnover above the VAT registration threshold will have until April 2019 before MTD becomes mandatory.

 

MTD plans to transform the tax system by implementing a number of significant changes. These changes include, but not limited to:

  1. Those businesses that qualify will have to send “updates of income and expenditure” to HMRC on a quarterly basis. Only businesses with a turnover (not profit) of less than £10,000 will be exempt. When an update is due, businesses and landlords will have one month to compile the information and confirm to HMRC that it is complete. Our feeling is that this will be aligned to current VAT reporting but, obviously, in significantly more detail.
  2. The business will then need to make adjustments at the year end for accounting and tax purposes. Once done they will have to complete a year end declaration. Our feeling is that this will become the 5th return for a financial year, whereby the accountant reconciles the previous 4 returns to the actual figures for the year (much in the same way that annual accounts are currently prepared and any mistakes/errors by the business are corrected).
  3. It will be possible for businesses to make voluntary tax payments on a regular basis. This will make it possible for them to avoid paying a large tax bill at the year end. Our feeling is annual tax charges will become a thing of the past and, like VAT, business tax will become payable quarterly upfront rather than annually in arrears,
  4. Records will have to be kept digitally, using apps and cameras to upload pdf’s of expenses/receipts, or performing these tasks manually and then, somehow, feed this information to HMRC . You will have to keep your records on some form of digital software Our feeling  Clients need to consider moving from spreadsheets/manual records as soon as possible, and at least run a digital account parallel to existing record keeping until comfortable with.

HMRC will require up to date information for their quarterly reporting. This means that there will be no more waiting to the year-end and handing over a shoebox of receipts to your accountant!!

How can businesses prepare?

In order to prepare, small businesses need to look at investing in appropriate accounting software. This will enable them to keep their records digitally, and up to date, for upcoming quarterly reporting.

Accounting software such as SAGE One “start” (our recommended solution) will make it possible for small businesses to keep track of their income and expenses and file the necessary returns.  There are also other advantages such as automatic bank feeds that will in general reduce manual input time, apps for mobiles and ipads etc.

This type of software also allows ourselves to access in real time and offer assistance – a monthly subscription from SAGE directly is £6+vat/month (ignoring intro offers of 50% for the first 3 months) but we are able to offer it directly at £4+vat/month. Any opening balances/system setup will be provided to you free of charge by ourselves.

 

 

Our overall feeling 

There’s really no way of avoiding these upcoming changes.  We will offer support and guidance as always.  Should you have a preferred different platform to SAGE One “start (such as Xero, IRIS KashFlow or FreeAgent) we will accommodate, although SAGE is our recommended option and has been integrated into to our fixed fee offering.

 

 

Address

SJM Accounting Services

51 Wilmslow Road  

Cheadle

Stockport

Cheshire SK8 1HG

Making an appointment

If you have any questions, require a callback or wish to make a free, without obligation, appointment please contact us

 

Tel:  07778 590056

Email: info@sjmaccounting.co.uk

 

 

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