Do you breakout in a cold sweat at the thought of your annual tax return?
Yes. Well, how do you feel about filing 4 times a year instead?
By 2020 HMRC expects every business, the self-employed and every landlord to file 4 electronic updates a year online instead of an Annual Tax return.
Recent research found 75% of UK businesses do not currently maintain their accounts electronically using accounting software*.
The Institute of Chartered Accountants is urging the government to make more information available about HMRC’s digital plans and the move to online filing of accounts. The 75% of businesses without an electronic accounts system will soon be struggling to cope with filling out 3 additional returns updates a year and likely to face hefty fines. It’s hard to see how HMRC will be able to impose the additional filings without the threat of fines for not complying.
If you are struggling with the changes don’t worry. In this blog I’ll walk you through the changes and the solutions. That way you’re armed with the right information for understanding and easily dealing with the quarterly tax updates.
Why does HMRC want a new system?
The new online system is to replace Annual Tax returns allegedly to simplify tax using technology to cut costs and improve user experience.
It’s important that you’re aware that HMRC is expecting everyone to adopt software and apps compatible with HMRC. You’ll be obliged to automatically update HMRC with an up to the minute and accurate declaration, every quarter.
How will the changes to filing accounts impact businesses?
Whatever you think of the new system, there’s no escape. It will happen. Not only is it a fundamental change to the way HMRC works, it fundamentally changes how businesses and self-employed must think about tax planning. HMRC is trying to get away from the lumpy tax payment dates of January and July. Moving to a quarterly system will spread the payments and will also accelerate the flow of cash into the Treasury coffers. HMRC is consulting on whether quarterly payments should be voluntary or mandatory.
Instead of reviewing tax retrospectively you’ll have to submit details every 3 months in real time.
The government has gone out of its way to say the additional filings will not be tax returns but are being tight lipped about what the filings will consist of.
The 75% of businesses that have not transitioned to digital accounting have 3 options:
- DIY accounting 4 times a year using free apps, risking mistakes or fines
- Invest in compatible accountancy software
- Find a trustworthy accountant who is ahead of the changes
What do UK businesses think?
Many experienced business professionals have lambasted HMRC’s track record for customer service and fear mistakes will be made during implementation causing taxpayers further lost time, increased stress and extra money worries.
The changes to filing tax returns 4 times a year angers many business owners who think the tax burden is becoming 4 times worse.
“These changes are going to be very onerous. It is not just about filling in a form, it is going to be a real burden.” Roy-Chowdhury, from the Association of Chartered Certified Accountants,
Like a minority of business owners and accountants I feel at ease with the changes. The reason being we’ve already invested heavily in Cloud Accountancy technology compatible with HMRC systems. Read our blog
Using Cloud technology allows us to hold all the relevant business and tax information in one easily accessible place for our clients. A single view means we have an up to date picture of clients’ businesses and know how much tax is owed any day of the year.
Put simply we’re ready to update HMRC, anytime, at the push of a button.
To find out more download ‘making tax easier’ from HMRC web site
I’m happy to discuss a low fee and easy way to manage your tax returns by calling 0141 290 0262 or email . You can also connect with me on LinkedIn.
P.S If you found this helpful you can read more of our tax & business advice blogs aimed at business owners and managers here at www.muwca.co.uk