Last week I was invited to attend, with some other local bookkeepers and accountants, a consultation meeting with HMRC and the Office of Tax Simplification to provide feedback on several suggestions being proposed by both organisations around tax. Business owners were invited by the Federation of Small Businesses to this regional meeting but sadly none did which demonstrated that the majority of business owners rely on their accountant and/or their bookkeeper to keep them up to date with changes which will affect them.
One of the items on the agenda was digital tax which comes into effect from April 2018. The current plans are that businesses or individuals with a turnover greater than £10,000 per annum will have to submit their accounts to HMRC on a quarterly basis. Businesses will be expected to submit this information within one month of the end of the quarter with the fourth quarter and end of year submission having a later deadline so that the accounts can be tidied up. This will apply to sole traders, partnerships and limited companies and submissions will have to be done electronically unless there is a good reason why a business or an individual cannot do this.
Technology is moving so fast and accounts are generally kept using software whether it is a spreadsheet, a desktop software such as Sage or a cloud accounting software such as Xero. Receipts can be photographed on your phone, sent to your software for processing and retained as electronic documents negating the need to maintain paper records.
HMRC expect that business owners use this digital technology to keep their accounts up to date and as their accounts will always be up to date they believe there will be no difficulty in business owners submitting their accounts information to them on a quarterly basis. HMRC consider that submitting quarterly information is advantageous to business owners as they will know what their tax liability is for each quarter and will therefore be better able to prepare for it. There are no plans to change the current January and July payments on account.
As a bookkeeper I know that there are business owners who can't do their accounts, don't want to do their accounts, or just don't have time to do their accounts. There are many business owners who want to have the security of a professional doing their accounts because they don't understand what they can claim and what they can't. Many of these business owners will employ a bookkeeper, outsource their bookkeeping to a practice like ours, or ask their accountant to do it. However there are many more who do not do their accounts quarterly as they are not VAT registered and do it themselves just before the 31 January deadline because they can or because they can't afford to pay someone to do them. From April 2018 these business owners will not be able to wait until just before the 31 January deadline. They will be expected to produce quarterly accounts whether they are VAT registered or not.
HMRC have indicated that there will be free software to do the submissions so there is no reason why a business owner can't do it themselves but anyone who feels they might need professional help should start planning for April 2018.
Preparing quarterly accounts with a one month deadline will put a lot of accountants and bookkeepers under pressure so it makes sense to establish your relationship with one sooner so that you are well prepared. Business owners who leave it to the last minute may not be able to find a good professional to help them.
This proposal is in its consultation stage so if you want to add your feedback to the consultation please follow this link.
