HMRC has given the go ahead for its “making tax digital” or MTD program. The MTD plan is expected to launch next year and the transitional costs are expected to be around £280 – £500 per business between 2017 and 2021.
Tax returns will need to be made at least quarterly under the plans to align business tax returns much with payroll whereby PAYE and National Insurance is collected monthly. Self assessment tax returns will become redundant. The four aims of MTD are:
- Tax compliance will be simpler as all details held by HMRC will be visible via an online account
- Information held will enable tax liabilities to be calculated more quickly. Tax liabilities will be visible in real time, allowing businesses to manage cashflow better
- Information will be held in one place in a digital tax account
- Interaction with HMRC will be easier
Businesses will be allowed to continue bookkeeping using spreadsheets, will but will required to use HMRC compliant software to format and submit data to HMRC. Businesses will need to:
- Review current bookkeeping processes, data capture and recording
- Investigate bookkeeping software or HMRC software for recording
- Change cashflow and management accounting formats
- Maintain upto date, current monthly records
Kevin Drew, Director of Ascentant commented “We would advise businesses to begin looking at their internal accounting policies, procedures and the way in which they undertake bookkeeping to align themselves the HMRC needs and minimise the costs and shocks that MTD may bring”.
Additionally GDPR (General Data Protection Regulation) is expected to replace the Data Protection Act in 2018 and businesses would be wise to encompass the GDPR requirements into MTD changes to policies, procedures and methods of working.
Contact Ascentant for further information on planning for MTD or GDPR requirements.