Making Tax Digital for Businesses
Will you be ready to count your beans quarterly?
The government has long been planning their roll out for Making Tax Digital for Business, but what does it mean for you and when are you going to have to comply?
Below I’ve identified the timeline and key changes, some of which may be positive but may equally cause you more than a few headaches.
What are the changes?
The main message to keep in mind is that Making Tax Digital is as much about making tax quarterly as it is about making tax digital (although stopping short of paying tax quarterly for the moment).
This is because the whole premise is that every business with a turnover above the VAT threshold will need to provide summary tax data on a quarterly basis. HMRC has set up a legislative framework so that businesses will have to move from the current system of doing annual tax returns to a system where you must: “provide summary tax data to HMRC quarterly, using digital tools”. (Source: Making Tax Digital for business - GOV.UK)
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As part of the process of moving to Making Tax Digital the government will collect information on your business (and you) from wherever it exists – “for instance from employers, banks, building societies and other government departments”.
This is highlighted by Government as a major positive because you won’t have to provide information they already have. Government data sources will be merged into one source.
But not everyone agrees that this is a positive move as clearly government will have a lot of centralised data on you and your business. There are also concerns that quarterly tax demands will soon follow which could have cash flow implications for some businesses.
What is the timetable?
There was a major change made last year with the Government relaxing previous plans for smaller businesses to move to the new system and pushing their previous rollout timetable forward a year.
The revised timetable announced in July 2017 says that business will only be mandated to use the new system from 2019 and “only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes, businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020”.
Smaller businesses can opt to use the new system on a voluntary basis and live pilots are already starting for some businesses.
You can find out more about Making Tax Digital at The London Group event on 28th March 2018 – forewarned is forearmed.
Are you ready to find out if you qualify or how much your R&D claims could be worth?