What do The Kinks and HMRC have in common?
17 May 2017
As long ago as 1986, one of the songs on the Kinks “The Road” album was Think Visual. Ray Davies implored us to “Think digital, synthesise, computerise, think visual”. 30 years later, HMRC are doing more than asking us, they are forcing us to go digital. From 6 April 2018, a personal tax return will be a thing of the past and we will all have digital tax accounts. This is all part of HMRC’s “Making Tax Digital” revolution where an individual’s account will be prepopulated by information on earnings and benefits received directly by HMRC from employer and the details of interest received will flow in from banks and building societies.
This all sounds very positive and it will be for many people. However, certain information will still have to be provided by tax payers or their agents but again, this will have to be in electronic form and will have to be provided in respect of self employed income and property rentals.
Much of the fine detail is not yet available, not helped by the calling of the forthcoming General Election.
HMRC believe that the MTD project will reduce errors and enable tax payers to see their tax position in real time. Things should certainly be simpler for employees and those in receipt of pensions and investment income.
However the radical change will come for the self employed and those with more than a fairly modest amount of property rental income. The two main requirements for individuals affected by this are:
- Their record keeping will have to be maintained digitally albeit many use computers to a greater or lesser extent at the moment anyway, and
- Quarterly updates will have to be made to HMRC using accounting software packages.
The days of the paper return will basically be gone.
There will however be alternatives for those who genuinely need them which may include people living in remote areas without reliable broadband and those who, on religious grounds do not use computers. There will initially be a de-minimus turnover level of £85,000 per annum for self employed businesses and landlords which will reduce to £10,000 a year later.
A number of free accounting packages will be available to keep the costs to business down but businesses with an existing package should be able to use this. It may however be worth checking with your provider. If you think you will have any difficultly however, please contact us and we can ensure that you are set up in time for what will be the biggest revolution to the tax system since the introduction of self assessment.
Many representations have been made to the Government and HMRC that MTD should not be compulsory for business but this has fallen on deaf ears. Similarly, there seems to be little need for quarterly updates other than HMRCs desire to ensure that everyone who should be using digital accounting records is actually doing so.
There will no doubt be more twists and turns as the legislation, which was one of the casualties of the recent streamlined finance act, is enacted but we will continue to keep you advised.
For businesses which do not use computers to a significant extent, or not at all then, as Think Visual goes “Better get Computerised” and “Get your Attitude Straight”. We can advise on accounting packages, provide training and also look after your book-keeping function and quarterly reporting using a cloud based accounting system. If you have any queries please contact us by email or call 0141 221 2984.