We have heard many viewpoints and pronouncements from all parties with an interest in this subject, ever since it was first announced by the Chancellor back in Autumn 2015.
The basic premise of the scheme is that the government would like all businesses with net income of over £10,000 to report their income on a quarterly basis using an “electronic” method of communication. This will be managed by the tax payer and HMRC using a “one stop” online account which will include information gathered about each individual from a number of sources. These might include payroll information submitted by employers under RTI, as well as income from pensions received. It is expected that banks and other external sources will also eventually be able to populate income information although this is some way off yet! It is also hoped that this will interact with the new Universal Credit system to provide more timely information for the payment of benefits and prevent some of the large over-payments that occur under the current Tax Credit system where income is reported annually.
We are pleased to announce that the Government has listened to concerns raised by our Institute and others about the pace of change and is taking steps to ensure a smooth transition to a digital tax system. Under a new timetable published on 13 July 2017 only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes, they will only need to do so from 2019. Businesses will not be asked to keep digital records or to update HMRC quarterly, for other taxes until at least 2020.
In order to prepare the information required under this scheme all businesses will be expected to utilise electronic record keeping. Software for this purpose will be available in many forms, with HMRC insisting that software providers make available a basic version of their software for free, as HMRC will not be creating any software themselves. Whilst spreadsheet records will be acceptable as an electronic record of transactions, they will be required to feed into a software package for onward submission to HMRC.
Transmissions will be made quarterly to HMRC, with a year end finalisation also to be carried out where annual adjustments such as Capital Allowances can be entered.
There has been no suggestion that there will be any changes to the deadlines for payment of tax at the moment.
Software providers are now starting to make the free products available and we are reviewing the various offerings as they are released. If you have any questions about how this may affect your business please do contact us to discuss your options, A discussion with us before you make any decision will ensure that we can work together to make the process as easy and cost effective as possible.