At the March 2015 Budget, the Government set out the vision for a transparent and accessible tax system fit for the digital age – putting an end to the tax return for good.
Millions of small businesses are already using HMRC digital accounts. In 2016, every individual and small business will have access to their own secure digital tax account – like an online bank account – that enables them to interact with HMRC digitally.
By 2020, HMRC will have moved to a fully digital tax system where:
- Businesses have access to digital accounts enabling them to register, file, pay and update their information at any time
- The tax system operates more closely to ‘real time’ keeping the business up to date and stopping tax due or repayments owed from building up
- Businesses will no longer have to wait until the end of each tax year before knowing how much tax they should pay, avoiding any nasty surprises
- For the vast majority there will be no need to fill in an annual tax return – most businesses will keep their records using digital tools and send that information quarterly to HMRC.
Quarterly in-year updates
Under the new Making Tax Digital for Business changes, businesses will only need to report summary information produced direct from the software, on a quarterly basis. This will exclude transaction data.
The software will help the business to categorise and summarise the information, so the process of providing the quarterly update will be a straight forward process.
The business will finalise its taxable profit after the end of the period of account as part of the end of year process and be able to make amendments at any time it chooses up to the final declaration.
These quarterly submissions are for summary information only and there will be no requirement for businesses to submit four tax returns over a twelve month period.
HMRC will begin piloting digital record keeping and quarterly updates for a full year from April 2017 with some businesses, but the full implementation is not expected until April 2018 at the earliest.