From April 2018, small-businesses and landlords will be required to maintain digital records, such as invoices, receipts and other expenditures, and to submit this information to HMRC website on a quarterly basis. This information will populate each taxpayer’s digital tax account, alongside the information HMRC already receive from banks and other sources.
For self-employed taxpayers, from April 2018 your accounting periods will change each year and you will no longer need to distinguish between capital and revenue when using cash basis accounting. Landlords, you will be able to extend your cash basis accounting, meaning that you will pay tax based on the difference between money you have taken in and paid out. Moreover, reporting requirements in general will be reduced for all businesses, to make the tax system easier and more efficient to use.
This is due to the government’s vision to transform the current tax system to fit the digital age. The ‘Making Tax Digital’ bill was launched in December 2015 after the Annual Budget. It explained how the HMRC will transform the tax system by 2020. Their aim is to increase the accuracy of tax record keeping and make the tax system easier to use through a digital-friendly system, helping taxpayers, like small-businesses and landlords, update their tax records easily.
Overall, this isn’t a big surprise to those who already use accounting software to keep their tax records up to date. Now you will just have to meet HMRC requirements when updating your records online. If needed, you can seek our guidance on how to comply. Yet, those who don’t use computer systems should not panic, as Rothmans can help every type of taxpayer and business to adapt to the digital transformation, through our experience with dedicated account software and apps for a wide range of clients.