I recently attended my local networking group where the topic for the month’s meeting was about ‘Tax Submissions Going Digital’. And, as the topic would suggest, it was about the tax system we currently know (& love, I am sure!) where businesses ins & outgoings are submitted via a portal on the HMRC website around 9 months behind the close of the previous financial year, thereby calculating tax owed by businesses.
By all accounts (excuse the pun!), the new system coming in to place will basically require businesses to submit tax calculation information within ‘real time’, ie. within a month of the year-end at the very least.
From April 2019, businesses will be required to submit VAT requirements digitally only via accounting software or spreadsheets & bridging software, although this latter option apparently is only a temporary measure, who knows for how long.
The days of the HMRC portal are certainly numbered, according to this information.
As always there will be stages of introduction to this new policy. The initial stage will be businesses with a turnover of more than the VAT threshold (currently £85,000) and who are VAT registered. If a business turns over less than the threshold, this will not yet be enforced, and in theory, the online portal will still remain as is.
There are no exemptions for charities within this policy. Basically, if you’re turning over less than £85k then you can breathe a little easier for now. Anything above, then it’s time to get up to speed on these changes and talk to an accountant about the impact they could have.
There are of course some options to pave the way for making the switch…
- embrace new accounting software & make the most of the training available to educate yourself & your staff as to how to use it to ensure you meet the guidelines due to be brought in.
- move from a paperwork system to excel spreadsheets and ask an accountant to use the bridging software options; although as mentioned this would only be a temporary measure.
- outsource your book-keeping and leave your accountant to do all the hard work for you!
Looking to the future, and in an ideal world, apparently the HMRC are looking to achieve the following:
- all VAT returns will be submitted via digital accounting software
- quarterly reporting for all businesses for income tax (including landlords) and corporation tax
- tighter deadlines (ie. submissions 6 weeks after every quarter end)
- optional quarterly payments on account for income tax (with this eventually becoming compulsory)
Now, before we all start losing our heads over this (as well as the GDPR elephant in the room!), as we all know the HMRC system cannot change overnight. If you’ve ever tried to call the Tax Office to query calculations, codes or anything similar often you can end up waiting on the phone for a considerable amount of time & when you do speak to someone their knowledge can be virtually nothing compared to another member of the team you might have spoken to previously.
Basically, there aren’t enough personnel to cope with demand as it stands, so to bring a new system in with more frequent submissions, reporting and payments could take some time, longer than initially anticipated. A wish by many I am sure.
That isn’t to say however that we shouldn’t be aware of it. Just like GDPR, don’t stick your business’ head in the sand & expect it to go away. It probably won’t, & it may morph in to something spectacularly different. Instead, get your business prepared, make the move to software accounting (your accountant, if you have one, will be able to recommend one and if you’re a sole trader you can do worse than using an option like ‘Wave‘ which is free to use), and be prepared to be able to report more frequently. Then if & when it happens, it won’t be such a shock to your businesses systems.
My thanks to Jane from Jane Ascroft Accountancy for the information, which I have interpreted for the purpose of sharing with you.
Be sure to drop me a line if you would like more information or have any questions.