Given that HMRC are expecting the digital regime to go live from April 2018, the roll out of the new system is going to be rushed!
SO WHAT DO WE KNOW NOW?
In the 2015 Budget, the Chancellor George Osborne announced that the tax regime would be simplified and that the traditional tax return would end.
Most experts believe that “simplified” is another way of saying that HMRC will see yet further cuts to their staffing levels.
The Chancellor provided more flesh to this announcement in the 2015 Autumn Statement that HMRC will become one of the most digitally advanced tax regimes in the world.
HMRC aims to increase the amount of information that is feed into the system. Information such as employment and private pension income, for example, is already received through employers and pension providers RTI submissions.
Quarterly Updates – Implementation
From April 2018, HMRC will require most sole traders and landlords to keep their records in a digital format and submit information to them on a quarterly basis. These are being called Quarterly Updates (remember tax returns are being killed off).
The timetable for Quarterly Updates to start is:
- April 2018 – all sole traders and partnerships start reporting irrespective of their VAT Status. Individuals with secondary incomes (e.g. rental income) of more than £10,000;
- April 2019 – all VAT Returns to be filed digitally;
- April 2020 – limited companies will start reporting.
The accounting profession has told HMRC that the timetable should be changed with those businesses (i.e. medium to large companies) most able to enact the new regime going first.
Quarterly Updates – What information is required?
The accounting profession is awaiting the publication of the consultation document in order to ascertain what information HMRC will require to be submitted. HMRC have only stated that:-
- They do NOT want information from the taxpayer that they receive from other sources;
- Records must be kept on a digital format;
- Taxpayers will not need the services of an accountant to file the Quarterly Updates.
From those small snippets, the accounting profession believes that the Quarterly Updates will be composed of:-
- A quarterly income and expenditure account;
- All sales invoices on a digital media;
- All expense receipts on a digital media;
- Bank statements.
Another unknown is what media the information will be sent on. HMRC and bookkeeping software companies are consulting on this matter. We do know that the use of Excel will NOT be permitted.
Based on the information feed into the digital accounts, HMRC will be able to review the records and contact the taxpayers with any problems. They will also predict the taxpayers likely tax liability.
When HMRC do issue their consultation document, we will keep you in touch.
If you need any assistance then please contact us on 01708 671910 or complete the form below.
Local accountants and tax advisers, Trueman Brown, specialise in dealing with small businesses. If we are local and nearby to you and if you need advice, then please contact us below.