Making Tax Digital – How We See It

SMART Bookkeeping understand the difficulties of trying to understand changes in tax legislation. To help you understand Making Tax Digital, we have put together this fact sheet.

Making Tax Digital – Digital VAT Returns

Here’s what we can do to help you become compliant.

As of the 1st April 2019 all VAT registered businesses must submit their VAT Return via Digital Accounting Software such as QuickBooks Online. You will no longer be able to submit your VAT Returns via the HMRC gateway log in as you would now. This is all part of Making Tax Digital. If you are one of many businesses that still keep records on spreadsheets or desktop accounting software that is not compliant, SMART Bookkeeping can help you make that change. QuickBooks Online is all your accounting needs in one platform with no hidden costs! It houses VAT Return’s, Payroll and CIS. With automated bank feeds there is no more manual inputting of your bank statement lines. QuickBooks online is also a great platform to become paperless.

SMART Bookkeeping are MTD compliant - Allow us to help you become compliant too. Sarah is a QuickBooks Advanced Pro-Advisor and her knowledge will have you up and running in no time.

Tax Simplified

By 2020 HMRC plan for all your tax information to be available to you in one place – your digital tax record. According to HMRC, this means that by that point you will no longer have to complete a tax return, only review the information that HMRC holds and make a declaration to say that it is true and complete.

HMRC of course make it sound wonderful. They will know how much interest you have earned from your bank, or how much pension contributions you have made, but they cannot possibly know all your tax affairs and so anything outside of the public domain will still need to be reported. That is unless they have developed some mind reading technology that they have not yet told us about. Watch this space.

Tax in one place

Ok, so HMRC have got this one right. Seeing all your tax affairs can only by positive. At the moment taxpayers cannot see a single picture of their liabilities and entitlements in one place, but that is about to change.

By 2020, taxpayers will be able to see their complete financial picture in their digital account. They will be able to set an over-payment of one tax against the under-payment of another. Although, how often do we give too much of our money to HMRC?

Making tax digital for business

In March 2015 the UK Chancellor announced the end to the Self-Assessment for UK Businesses. Most companies will have to start updating HMRC quarterly from 2020 and will likely be linked in with the VAT quarters. Businesses will have to use 3rd party software and will have no choice on this.

HMRC state that they aim to:
⦁    Simplify the tax system
⦁    Improve communication and tax information.
⦁    Introduce a system that is more effective, efficient and easier to use for tax payers
⦁    Reduce errors

The aims that HMRC have published are all about improving the tax system for businesses, but underneath that they are looking to have more up to date information for budget purposes, reduce errors to ensure the correct tax is paid and also get payments in earlier. Paying your tax as you go will be optional. For now at least..

Making tax digital for individual tax payers

Individual tax payers will interact with HMRC digitally and at any time to suit them. Every individual now has access to a digital tax account. The digital account will present individuals with a personalised picture of their tax affairs.

It is likely to result in more admin for sole traders especially, who are already stretched. In theory, you are only reporting what you already did, just in smaller chunks. Therefore, in the long term the burden isn’t much increased. It will also encourage people to keep their records up to date which can only help them run their business.

To summarise

You will pretty much have to tell HMRC everything you already did, just more often. If you are vat registered then actually most of your records will be sufficiently up to date and you will probably not have much impact. If you are a sole trader with a small business who hands everything to your accountant/bookkeeper each year then you will now have to keep digital records throughout the year.
The end of the tax return? We don’t think so. Perhaps some of the boxes will be filled out for you but you will still need to check it (and therefore make the calculations anyway) and fill out any relevant details. It’s still a tax return even if you rename it.

Is it a good move?

For HMRC undoubtedly. For the rest of us – yes, I think in the long run it is. But as with everything HMRC, expect a bumpy ride.