The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
By Lynne Gowers on 18th November 2016
Last year, the government set out their vision for a digital revolution of the tax system, announcing a £1.3 billion investment to transform HMRC into one of the most digitally advanced tax administrations in the world.
The aim of Making Tax Digital (MTD) was ostensibly to “reduce burdens for taxpayers and build a transparent and accessible tax system fit for the digital age” (Gov.uk’s policy paper on MTD)
The government’s end game is that by 2020, HMRC will have moved to a fully digital tax system; out with tax returns and spreadsheets, in with real-time information and online accounting.
For businesses, this means that they will not have to wait until year end before finding out how much tax they owe. HMRC will collect and process information in as close to real-time as possible, giving businesses more clarity over their tax position and helping them budget accordingly and avoid penalties.
By 2020, most businesses, including individual taxpayers who are self-employed, will be required to manage their tax affairs digitally and report to HMRC at least quarterly via their digital tax account.
Some representative bodies including the Federation of Small Businesses have lobbied against these reforms, citing the considerable cost, in both money and time, of software and the migration to new systems. There are also concerns over the perceived additional administrative burden, particularly on smaller enterprises.
Last week, in a letter to the Financial Times, Jim Harra from HMRC addressed some of these concerns, stating that: “HMRC will not be asking anyone to file accounts five times a year, nor will we be introducing in-year quarterly payments. Businesses will simply send in-year updates to HMRC using information collated automatically by the same software used to record day-to-day transactions. This will help businesses pay the right amount of tax, taking away the need to put things right at a later date. Businesses already keeping their records digitally should see no additional costs at all.”
Mr Harra went on to urge businesses to look at the big picture when it comes to Making Tax Digital: “We fully recognise that this is a significant change for some businesses, which is why we’re introducing it gradually as well as exempting some of our smallest businesses, but at the heart of digital transformation is a simpler, more efficient tax system that frees business people from red tape and form-filling.”
Whether you are a small business, a contractor or a sole trader, as a Boox client you have access to simple but sophisticated online tools and mobile apps which are perfect for the sort of digital interaction the Making Tax Digital initiative is aiming to achieve.
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