'Tax hikes expected as government tries to plug R50bn hole' - Economist

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HMRC is making tax digital in the UK – Are you ready?

Making Tax Digital is HMRC’s plan to bring UK tax into the digital age.

'Tax hikes expected as government tries to plug R50bn hole' - Economist

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Nearly every UK business will be affected.

In a nutshell:

  • Tax returns will have to be submitted digitally through an MTD-compliant software. Tax submissions by post or through HMRC’s website will be phased out.
  • All business related transactions will have to be recorded digitally using MTD-compliant software or apps.

April 2019 – VAT (phase 1)

Who’s affected?

VAT registered businesses with turnover above the VAT threshold (currently £85,000 excluding VAT).

How?

  • MTD-compliant software or apps will have to be used to
    • keep a digital record of VAT transactions
    • submit VAT returns
  • Submitting VAT returns using HMRC’s own VAT online services (currently accessed by logging on to HMRC’s site) will no longer be possible

April 2020 – VAT (phase 2)

Who’s affected?

The remaining VAT registered businesses – those voluntarily VAT registered with VAT-able turnover under £85,000.

How?

  • MTD-compliant software or apps will have to be used to
    • keep a digital record of VAT transactions
    • submit VAT returns
  • It will no longer be possible to submit VAT returns using HMRC’s own VAT online services (currently accessed by logging on to HMRC’s site)

April 2020 + Corporation tax & self-assessment

(The start date will be confirmed by the government following the successful rollout of Making Tax Digital for VAT.)

Who’s affected?

Sole-traders, Partnerships, Landlords and trading companies.

How?

It’s likely that:

  • MTD-compliant software or apps will have to be used to;
    • keep a digital record of financial transactions
    • submit quarterly updates to HMRC for both income and corporation tax purposes

What’s wrong with spreadsheets?

As part of their drive to reduce mistakes, HMRC are encouraging businesses to move away from keeping their records on spreadsheet software like Microsoft Excel and Google Sheets. When Making Tax Digital takes effect, you won’t be able to submit your spreadsheets directly to HMRC as part of a VAT return.

Ideally, to avoid any hassle you should be using an all-in-one financial management system that keeps MTD-compliant records calculates what you owe and allows you to submit your VAT directly to HMRC.

How Exceed can help you

Gerhard Visagie from Exceed Accountants commented that “business that doesn’t make the change to MTD compliant software soon, will face significant challenges and additional costs to submit information to HMRC.  Apart from having a tool to comply with MTD, a good accounting and reporting system is crucial in running and managing one’s business”.

Exceed has already migrated the majority of their clients to software that will make MTD a non-issue.  If you would like them to help your business get ready for HMRC changes, please contact enquiries@exceedca.com

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