Making Tax Digital - What does it mean for you?

Many of us have read these words in passing, but what does this actually mean to SME’s and self employed people?

What is Making Tax Digital?

The Government wishes to get rid of the annual tax return that so many of us loathe and Making Tax Digital is a key part of that initiative. It aims to modernise the system and help businesses and the self employed keep on top of their tax affairs.

How will it do this?

There are four foundations on which Making Tax Digital is based:

1. Better use of information.

Having a digital tax account will mean that you can see what information the HMRC holds about you whenever you want and not revisit your employers, financial institutions or other Government bodies. The HMRC can also use this information to personally tailor the service it provides for you saving time and effort.

2. Tax in real time.

You will no longer have to wait until the end of the year to know your tax bill. This will be updated as HMRC collect and process information and will help to stop errors and delays in tax payments.

3. A single financial account.

By 2020 everyone will be able to see one comprehensive picture of their financial affairs in their digital account, exactly as you can with online banking.

4. Interating digitally.

You will be able to interact with HMRC digitally at a time that suits you. In your personal digital account you will be prompted and advised and you will also be supported securely through webchat and messaging. The software will also be directly linked with the HMRC enabling you to send and receive information through your account.

Where are we now?

Although the idea for this system has been well received, there has been fears about the scale and pace of the changes for businesses. The Government has amended the roll out in order to give more adaption time and businesses will not be mandated to use it until April 2019 and then only for their VAT obligations.

Starting this month there is a small scale pilot to test the VAT functionality which HMRC will be monitoring. A spokesperson for the HMRC has said

“ We have been working with stakeholders throughout the development of MTD and a number of professional bodies have approached their members to encourage them to participate in the live pilot, starting in the Spring.

‘This pilot will be widened over the coming months as further functionality is added.’

Businesses wishing to take part in the trial will only be required to submit their VAT returns through the service and will receive plenty of help as they do so. There will be no additional compliance checks and there are a range of benefits from participating such as having the opportunity to influence how the system looks and feels and getting ahead of the game.

If you would like to be considered for participation please email: makingtaxdigital.mailbox@hmrc.gsi.gov.uk.

Whilst Making Tax Digital has been delayed and will have its implementation problems, the move to online digital tax accounts has to be an efficient one for all of us. With more of us moving to cloud accounting and expecting our information in real time, Making Tax Digital should be another piece in our online digital puzzle. If you have any questions about how this will affect your business, please do not hesitate to contact us.

 

Photo credit to Tinh tê Photo.