Making Tax Digital (MTD).
Currently we complete one Tax Return for you. Under MTD we will have to make five submissions. The proposals can be found here. I doubt very much if our clients will be happy to pay five times their annual fee, so how will we cope?
Most VAT registered traders (turnover greater than £85k) will have to comply with MTD from April 2019. At this level of turnover all of our clients are using bookkeeping software – QuickBooks Online (QBO), Sage, Xero, FreeAgent, VT etc. and we expect all these providers to develop appropriate procedures to deal with the new requirements. Most other traders and landlords will start in April 2020.
Where clients do not use bookkeeping software or manually record transactions then they will need to review their procedures. Completion of the actual return and accounts only account for a proportion of the fees we charge you. There is admin time (engagement letter, risk assessment, keeping on top of registers etc) which will remain the same. We anticipate extra time may be taken up by chasing for information each quarter. To keep this to a minimum we suggest our clients look at software solutions and take advantage of the services listed below.
HMRC has confirmed an exemption from Making Tax Digital for unincorporated businesses and landlords with a gross income/annual turnover below £10,000.
For our VAT registered and more established business clients we recommend QBO. While this is fully functional, it does cost £10 plus VAT per month and as such may not be cost effective for landlords and some of our smaller traders. MTD for these clients will start from April 2020 and we suggest they look at FreeAgent which is complimentary with a Royal Bank of Scotland\National Westminster Bank business account . There are charges for this account (usually £5 per month) however if you are paying bank charges anyway then this is certainly worth looking at. If you wish you to try FreeAgent let us know and we will set this up for you.
Digital Tax Accounts.
HM Revenue and Customs (HMRC) is setting up digital accounts which will give taxpayers access to details of all their payments and liabilities and will allow overpayments from one tax to be set-off against underpayments from another. These accounts will be pre-populated with information available to HMRC (i.e. employment income, pension, interest etc.). It will be the taxpayer’s responsibility to ensure that the pre-populated figures are correct.
We recommend setting up your digital tax account with HMRC now. At the moment this will allow you to access your personal details for:
- PAYE Codes.
- Self Assessment.
- National Insurance.
- Child Benefit.
- Tax Credits.
- State pension Forecast.
Have your National Insurance number and passport details to hand and apply here. The Revenue will be adding further information as the digital service is developed.
The intention is that the Revenue will collect your personal Tax Return information for you (Employment income, investment details etc.) and this will feed into your Self Assessment Tax Return. This may be the Revenue form or independent Tax Return software. You then check that this information is correct and add any missing items (rental, self employment, casual income etc).
If you decide not to use QuickBooks Online (QBO) or FreeAgent and wish to continue with hand written records or spreadsheets it will make sense to get an efficient system for sharing your tax records in place. If you can store your accounting records (or photos of the relevant pages) in a shared folder we can access this and avoid having to request/chase/collect/return this each quarter. Where we can access your records this will significantly reduce the additional work. To be honest I think our increased time costs in dealing manual records or spreadsheets will outweigh the software costs of of QuickBooks Online (QBO) or FreeAgent.
Dropbox is a file sharing service. Some of the benefits are:
- We both have access to the folder(s).
- A folder hierarchy can be set up to allow easier indexing of contents.
- You are accessing our Dropbox account so this should not take up any of your space if you choose to open your own personal Dropbox account.
- Much larger files can be saved and accessed.
- It is more secure than email.
- Deleted and old versions of files can be recovered.
- It is simple to use. Checkout the many videos on YouTube.
If you open your own account this is a very effective way of backing up your personal data and photos. The first 2 megabytes of space are free.
If you wish to use this service through Tax Data let me know and I will send you a link. You will using our storage space (free to clients) rather than you own.
Get ready for MTD now.
For VAT registered businesses MTD starts from April 2019. Most other businesses will have to start using MTD from April 2020. We offer training on QBO and FreeAgent or can do the bookkeeping this end at our standard bookkeeping rate – £30 plus VAT per hour.
To comply with digital submissions all affected taxpayers must use smartphone, software or computers. Further details can be found here.
Published 13 September 2017.
Updated 22 October 2018.