As a business owner, you may be aware that as from this month, HMRC will begin to make changes which will eventually see all businesses supplied with a completely digital tax account. By next year, it is envisaged that around five million businesses will have made the switch to digital.
At this early stage, we are unlikely to see any significant difference. However, by 2019, HMRC will be asking for updates from all those who are self-employed on a quarterly basis. This does not mean however, that it will require four tax returns. Instead, it will be looking for basic reports which, it assures us, will be quickly and easily supplied by means of online tools.
Initially, this seems like even more paperwork, administration and stress for the business owner. In actual fact, this system has been designed to be able to give you a clearer picture of your business finances and allow you to plan your tax payments more effectively, rather than burden you with an often-surprising tax bill at the end of the year. You will be able to access your information much more easily from your PC, laptop and mobile devices, whenever you need it.
Much of the information required will be gathered automatically by HMRC. This is likely to include but is not limited to, interest on bank accounts and income from investments, with tax payable by instalments.
2019 may seem some way off, but we are advising our business clients to begin preparing for these changes now. At this point in time, it seems likely that HMRC will request quarterly information in a “prescribed format”, which presumably means through recognised software. Once this software has been defined, most businesses and sole traders will need to ensure that their financial record keeping is transferred if necessary into this format, well in advance.