Last year’s Autumn statement contained an announcement which on the face of it wasn’t that exciting but will have a profound impact on our clients.
HMRC has had online services for Businesses and Individuals for many years. These are now being migrated into HMRC’s new “Digital Tax Accounts” which will give greater information about the taxpayer’s affairs. On the face of it this seems like a software change rather than anything significant. However there is one aspect to this that will affect most businesses in a way that will increase their compliance burden.
The government has announced that by 2020 self employed individuals and businesses will be expected to submit data to HMRC on a quarterly basis rather than annually at present. It is unclear how this will work in practice but what seems definite is that this is the end of businesses keeping paper records and only having to prepare a tax return on an annual basis. Indeed it has been much trailed that the personal tax return will be phased out completely.
The majority of our clients use some sort of bookkeeping software, but many of them have outdated copies of desktop software such as Sage which they do not use to directly submit information to HMRC.
It seems inevitable that the easiset way for businesses to comply with this requiremement will be to migrate to one of the online Book Keeping software systems such as Xero, Freeagent or Kashflow as they will have to include the functionality to submit the quarterly data required. Indeed the software Companies are one of the biggest proponents for this change as you can see here https://www.xero.com/blog/2015/11/autumn-budget-making-tax-easier-uk-small-business/.
This will not remove the requirement for Companies to prepare proper accounts on an annual basis and to submit a Corporation Tax return. As the basis that these accounts are prepared on is often different to how people run their book keeping it is hard to se how the quarterly information is going to assist HMRC! For a very basic overview of their intentions HMRC have posted this video https://www.xero.com/blog/2015/11/autumn-budget-making-tax-easier-uk-small-business/.
The easist way for clients to position themselves for this change is to make sure their bookkeeping software is up to date and possibly the “cloud” software packages will allow the easiest transition. Watch this space……………..