Making Tax Digital for Business
Making tax digital for business will start affecting the smaller businesses which are not registered for VAT. It is expected to commence in April 2019. It is still unclear from HMRC if it will include all small businesses or if very small ones will be excluded.
Small companies will have to submit their accounts online to HMRC quarterly, which is in line if you are VAT registered. It is unclear at the moment how this will be done and which accounts software will provide the feature. I would expect that most of the main accounting package providers will be able to submit directly to HMRC, but will need to amend their software.
The government has to still write the legislation and until this is done there are no clear guidelines.
Making Tax Digital for Business – Why do we need it?
One of the main reasons for converting to digital tax is to reduce the amount of errors that are made. HMRC reports that over £8 million is lost in avoidable tax errors.
At the moment small business owners find it difficult to know how much tax and NI they owe until they complete their self-assessment tax return. With the pressure of running a business, they are sometimes not submitted until the deadline. This can then leave the business owner needing to pay the whole figure immediately. Digital tax will mean that you can calculate the figure owed over the course of the year.
Digital Tax should I get ready?
If you are a small business, it may be worth starting to use a full accounting software package like Xero, QuickBooks or Sage. This will allow you to get up to speed with the process of doing your own accounts.
If you have not got the knowledge or time to complete your own accounts then now could be the time to get a bookkeeper or accountant in to help. Bookkeepers can get very busy and may not have time to take on new clients when the digital tax is implemented.
Make sure if you do take on a bookkeeper that they are qualified and have the correct insurance in place. They also need to be covered under anti-money laundry.
Further information can be found on the HMRC website.
