Don’t you just love the UK Government? UK businesses are just getting over the huge cost and upheaval from the Automatic Enrolment regime and now we have another one to deal with. You’ll love this.
They call it ‘Making Tax Digital’.
There are some exemptions for charities and similar organisations and there will be a turnover cut-off below which businesses will not have to comply with the requirements set out below, but in general:
- Businesses must keep digital accounting records. There will be rules about what these records must include by way of detail.
- Businesses must analyse their expenses at a minimum under the headings used in the current self-assessment return.
- Businesses must update HMRC with their income and expenses at least once every three months via a software that complies with MTD.
- Once a year the accounts for the business must be finalised by adding year-end adjustments and capital allowance claims. Such adjustments are optional for the quarterly updates. The time given for this will vary depending on the client’s accounting date, but will be the usual 31 January deadline for clients with a 31 March accounting date.
- Taxpayers will enter details of their income from other sources onto their personal tax accounts (PTA), or check the amounts shown on their PTA are correct.
- From April 2019, businesses which are registered for VAT must make their VAT returns through their MTD software.
So what does this mean for you?
It will only affect you now if you are a VAT registered business with turnover over the VAT threshold. The full implementation is planned for April 2020 – but this is likely to be delayed.
Very simply it means you will probably need to move your financial accounting system onto a cloud accounting system, such as Xero.
If you’re not sure what a cloud accounting system is think of it as the difference between traditional banking and online banking.
When online banking first came in there was resistance and worry over security. Now most people use online banking. It makes our lives easier. We can transfer money far quicker than writing out cheques and posting them. We can check our bank balance whenever we need to. We can move money between accounts instantly.
A cloud accounting system has many advantages over more traditional accounting systems (manual books and records, spreadsheets and desktop systems such as Sage Line 50).
Find out about the benefits of cloud accounting
Our firm specializes in cloud accounting systems.
If you haven’t changed your systems yet to comply with this new Government initiative please email me on firstname.lastname@example.org. Or give me a call on 08008 620 950.