Background to Making Tax Digital
In the March 2015 Budget the Chancellor made the announcement that the Government would create the most digitally advanced taxation system in the world. Little attention was given to this announcement until they issued consultation documents providing more details on 15th August 2016.
Shock to all business owners
It became apparent from the consultation documents that HMRC would make it mandatory for business owners to maintain their bookkeeping in digital format, and make reports to them every quarter directly from their digital software. They indicated that they would release their final decisions about the consultations in November 2016, but this was deferred until January 2017. On the very last day of January they provided a limited response that answered some, but not all, of the questions posed in the consultation document. We still await decisions on some key issues which they say will be released later in the year.
Are you ready for quarterly reporting?
Part of the consultation related to when these new changes would be brought into effect. The original proposal was for unincorporated businesses, including landlords, to start with effect from 5th April 2018. Businesses that are VAT registered would have to report digitally from April 2019, and incorporated businesses would have to start quarterly reporting from April 2020. The announcement in January 2017 confirmed that these proposed starting dates would remain unchanged.
What you need to do!
From the start date of the quarterly reporting, businesses will no longer be able to record their transactions in books or sheets, and, whilst HMRC have conceded that spread sheets can be used, the data from these needs to transferred to a digital program to submit the quarterly data. This will mean that businesses will have to either purchase software from providers such as Sage, Quickbooks or Xero, or alternatively, will have to pay someone else to do the digital bookkeeping and quarterly reporting for them.
Time for action
There is a short period of time before the new requirements become mandatory for businesses. However, the time to take action is now. Business owners need to decide how they are going to cope with these requirements and it is wise that they get used to the new way of doing their bookkeeping so that can be sure that they can do it correctly by the time that it matters. It is not a good idea to leave this to the last minute and have to learn as you go when the actual returns have to be submitted.
How DEB can help
Many business owners will not be able to cope with these new requirements. At DEB we have created award winning software called DEB-Book ProActive to enable us to take on client’s bookkeeping and do it efficiently and cost effectively for them. For those wishing to continue to do their own bookkeeping we are creating software called DEB-on-Air, which we will be releasing free to our clients within a few months. This will enable even those who have to start quarterly reporting in just over a year, adequate time to get used to the software to ensure they record their transactions correctly. We will also provide them with free training on how to use the software.
Keep yourself informed
This if the first of many blogs that we will be publishing to keep business owners informed. Please sign up to our blog on our website to ensure that you receive updates on all new developments as they arise. We are also going to be hosting free seminars on a weekly basis, starting in a few weeks time. In the seminars we will explain the quarterly reporting requirements to our clients and the alternative bookkeeping options that are available to them. Non-clients are welcome to attend by appointment. If you would like to attend a seminar, or speak directly to us on this, or any other matter, please contact us on 01226 245824.