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NEW BUSINESS START-UP
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TECHNOLOGY AND DIGITAL ACCOUNTING
The way that HMRC receives information and that tax returns will be submitted in the future is changing. Here at Michael D Nichols
Technology And Digital Accounting
The way that HMRC receives information and that tax returns will be submitted in the future is changing. Here at Michael D Nichols Limited, we believe that it is important that we understand and embrace these changes as soon as possible so that, when the time comes, we are fully prepared and able to act on your behalf with the minimum of fuss.
Under an initiative called 'Making Tax Digital', the government has proposed a move to a fully digital tax system, commencing in 2019.
The proposed reforms will bring three main changes:
- Certain businesses will be issued with a digital tax account so financial data is updated in real-time.
- Annual tax returns will become a thing of the past. Tax will now be assessed every quarter.
- These businesses will need to track and submit their financial records using a cloud based solution in order to integrate seamlessly with HMRC’s new system.
The move to a digital tax system looks to get rid of the backlog of receipts and invoices that can build up over the year, and instead convert them into digital records that HMRC assess every quarter. The change from annual tax returns to quarterly account submissions could mean that you will require our support with the management of your day-to-day finances and QBO will make this task more manageable.
Not all businesses will be subject to Making Tax Digital
- only businesses with a turnover above the VAT threshold (£85,000 in tax year 2017/18) 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
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
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