From now on it's got to be digital and quarterly and that's just the start of it! The saying goes, "the only things certain in life are death and taxes', well, one thing is certain, the traditional tax return is dead and it's going digital.
Digitisation of tax
We are in a rapidly accelerating digital world. More and more of our lives are now online. From social interactions and photo albums to holiday bookings and banking. In fact, millions of people and companies are benefiting from the practicality and ease of services going digital.
For us in the UK it started in, March 2015, when the Chancellor foretold the death of the tax return’ with the development of transformative digital tax processes for all. It would bring all individual and business tax data into one place, making it easier to register, file, pay and update your tax information online.
Simplifying, centralising and digitising tax for individuals is already rolling out, with the introduction of the Personal Tax Account. What comes next is the challenge of Making Tax Digital for Business.
There may be significant upheaval and a generational price’ to be paid but the UK is actually behind the trend. Australia and the ATO (their equivalent of the HMRC) have already gone digital and have an App, and in Holland it’s real time every time – with big brother watching every step.
Businesses will no longer have to wait until the end of the year to know their tax balance – the digital tax system will collect and process tax information in real-time. This will reduce tax-due and repayments owed from accruing.
What are the benefits to my business?
The new digital tax system will reduce form filling so that you won’t have to tell multiple HMRC services the information it already knows. It will help make time delays a thing of the past because the tax system will be in real-time – showing you up-to-date calculations whenever you log in. It also means being more aware of monies owed, allowing you to plan ahead.
Although a delay in parts of the roll out were announced in this Spring’s Budget, the first sections of MTDfB come into effect in less than a year.
The Chancellor’s announcement means that sole traders, the self employed and buy-to-let landlords with income of less than the current £85,000 VAT threshold will not have to start quarterly reporting until 2019, a one-year deferral from the planned April 2018 date. Those with turnovers above the threshold, still start in April 2018.
What do I need to do?
The change to digital tax need not be as daunting as it sounds. In many respects, this is an opportunity to streamline and simplify your own processes – how you record and capture your tax information. Think how easy you find it to take and share photos you use your Smartphone and it’s always with you. We have become a nation of selfie snappers and food picture sharers. With the right tools, recording and sharing the information you need for your tax return can be just as simple.
Although the process should be easy, never before has professional advice been more important see your accountant.
As things go digital, mistakes can be easily made. An expense in the wrong category, mileage missed or misplaced income could trigger automatic investigations. So we urge you to speak with your accountant for information and advice on how they are preparing and what digital tools and processes they are going to use which you need to dovetail into.
Accountants are preparing
At MyFirmsApp, we have been advising accountants since 2013 on how to respond to digital transformation. From webinars to a total of over 10,000 individuals to 1:1 consultations, we have been able to help accountants not only prepare themselves, but their clients with simple, proven and easy to use tools. Many started the journey feeling daunted but are now using mobile digital technology to their and their clients advantage.
The key is bringing all the digital logins, data capture and software integrations together into one single place a single App on your Smartphone. The App helps clients record income, expenses and mileage as simply as taking a selfie and posting it on Facebook. We now have over 1,000 firms prepared with their own, MTD ready App. Each firm has a tailor-made solution for their firm and their clients, in their branding so clients can find it and download it.
If your accountant doesn’t have a plan for MTD, they can get in touch with MyFirmsApp and we will talk them through the simple options for their own MTD App solution.
So, you see, we may be facing the death of the tax return’ but it does not have to be a painful transition to digital nirvana.