The majority of businesses will need to keep their records digitally by 2020 as part of the government’s Making Tax Digital (MTD) plans.
MTD will introduce a simpler and secure online process to manage taxes. It aims to remove the administrative burden and allow HMRC to collect information in real time.
The government will publish its response and requirements for MTD in January 2017.
So what do we know so far and how will it affect your business?
Some of the proposals as part of the change include:
Small business exemption
Businesses will have to submit quarterly reports to HMRC.
Small businesses/sole traders with an annual turnover or gross income of less than £10,000 would be exempt from quarterly updates and digital record-keeping requirements.
Cash basis extension
The cash basis accounting threshold (currently £83,000) will be raised. This would allow partners and sole traders to only declare cash when it comes in or out of the business.
Prompts and alerts
Users with digital tax accounts would receive prompts and alerts to help them avoid non-compliance.
As a business owner, you will need to use computer software to keep your company records up to date. Please contact us if you require help with software, as we have some very easy to use mobile apps and online accounting software to assist with this process.
HMRC has ensured that compatible software products will be available to suit the budgets and needs of all businesses, although there haven’t been any announcements about which providers will be compatible.
HMRC will also provide:
guidance on what you should look for
regular performance metrics relating to software packages
assistance on the suitability and reliability of commercially accessible products.