At present smaller businesses are required to file accounts once a year with HMRC when their Self Assessment or Corporation Tax returns are filed.
HMRC are now moving towards the provision of a digital account for business owners, a portal that will allow taxpayers to manage their tax affairs online. In the draft notes for the Finance Bill 2016 there is further clarification of the way in which HMRC will expect this digital account to be used.
Here’s what they have to say:
“Making Tax digital – As announced at Autumn Statement, the government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.”
This declaration is likely to have wide ranging implications. For example, will HMRC use this data to require taxpayers to pay their tax quarterly instead of twice yearly (if self employed), or annually if incorporated? Will tax due be based on current year earnings instead of prior year profits?
As stated, HMRC will be consulting on the detail this year. We will be keeping a careful eye on the outcome of their deliberations. Readers should be aware that these changes are unlikely to be implemented before 2020.
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