Making Tax Digital: is your small business on track?

Home Making Tax Digital: is your small business on track?

Making Tax Digital: is your small business on track?

Many of us these days file tax returns online. That’s one thing. But new legislation demands much more than that.

So explains this useful update over on Money Week.

‘In recent weeks, ministers have let it be known that they’re likely to delay plans to move individual taxpayers to a fully digital tax system by 2020, but the government insists it will press ahead with the switch over for most businesses’, it says.

The idea is, eventually, ‘to move all taxpayers into online tax accounts, eliminating paper-based records and submissions’, says Money Week, ‘in an effort to reduce tax leakage by £1bn by 2022’.

From next April

Original timeframes have changed.

‘Nevertheless, from next April, any business with an annual turnover of more than the VAT registration threshold, currently £85,000, will have to begin managing some of its tax affairs fully online.’

There are stages, that said.

‘Initially, the reforms will only apply to businesses’ VAT accounts, but the rest of their tax affairs will also have to move online, possibly with effect from April 2020.’

HMRC-compatible

It means much more than filing returns online – requiring ‘all tax records to be maintained online too, in a format that HM Revenue & Customs (HMRC) is able to access’.

So what does this really mean? And to whom?

‘This will affect firms that maintain their tax records in paper-based files, or in spreadsheets such as Excel, and then transfer their final calculations into online return. They will have to invest in HMRC-compatible software to shift this process into digital tax accounts, and then get used to operating in this way.’

Is this you?

Real advantages

There will be real advantages once the shift’s been made, Money Week predicts. Hopefully, accounts will seem ‘more efficient and cheaper to manage’.

‘It should also be possible to get a clearer picture of your tax liabilities on an ongoing basis, rather than having to wait until you’ve filed a return’, says the piece.

‘And there should be less scope for under- or over-payments of tax that have to be resolved at a later date.’

There’s quite a lot more in the piece, including how to check whether you’re exempt – with a turnover below the threshold, or with special circumstances – and advice on timings.

A useful, clear summary – check it out in full over on Money Week.

Photo by Yiran Ding on Unsplash

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