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The four Fundations of Making Tax Digital...

Between 2018 and 2020 the UK is going to see some quite monumental changes to the way that tax is dealt with, both for individuals and businesses alike. The government is embracing ‘The digital age’ by introducing measures that take advantage of everything that is good about modern technology. In this case, that is mainly the speed and efficiency it allows for fundamental parts of our lives. For many (even us at times) tax is a huge drag. It is slow, sluggish and bureaucratic. By making tax digital, this could all be a thing of the past. We hope so anyway.

David Gauke MP, the Financial Secretary to the Treasury and founder of this new and improved tax system, has outlined four foundations from which the changes will be built. He presents the changes as a transformation, with these specific areas used as platforms for what he intends to build.

Tax Simplified

The first ‘foundation’ revolves around simplicity. Much of what keeps tax at such a slow pace is the unrelenting requirement for forms and information. ‘HMRC requires X to deal with Y’. In a digital system, with an online account, this is likely to be a thing of the past.

The taxpayer will no longer have to tell HMRC what it should already know, or be able to find somewhere else. Through the creation of digital tax accounts, all data can be checked in real-time for accuracy, and the services supplied tailored to specific individuals. If an employer, bank, building society or government department has information about you, HMRC will find it and collate it all into a single account.

Making Tax Digital for Business

One of the biggest changes to business will be the ongoing updates of exactly what tax is due. Rather than have to wait until the year end to be given a sum, HMRC will instead collect and process this information, giving you a running total in close to live-time.

To make this possible, returns will now be due quarterly as opposed to annually. For incorporated businesses and self-employed individuals to be able to achieve this, cloud accounting software will be essential. Only by consistently updating your systems will quarterly reviews be possible though, which is why choosing a cloud-savvy accountant is vital. Did we mention that at Wood and Disney 100% of our accounts staff are Xero Certified Advisors, and very soon 100% will be Quickbooks Certified as well by the way? Just a little side-note there…

 

Advice for Start-Ups-Part 7: output and input VAT, and VAT checklist...

Our first section Part 1: Taking the Plunge didn’t hold any punches when describing the difficulties of setting up a business. In the next section Part 2: Who am I? we helped you to picture the shape of your business and what it would be as a legal entity. Part 3: What does it take to succeed?  looked at the commonalities between many entrepreneurs and how those skills are needed for a business to work. The next section, Part 4: Taking on Tax ran head on into the often confusing area of tax, helping to ensure your business runs legally. Due to its size, the next section was divided into two. Part 5a: Accounting for bookkeeping gave tips on keeping accurate financial records, and explained why they are important. Part 5b: What records will you need to keep? did what it said on the tin and answered its question. The previous section Part 6: Registering for VAT and Taxable Persons and Supplies explained what VAT is, how to register, and who and what is taxable.

In Part 7, we will first look at Output Tax. There are three rates of VAT that your business could be subject to:

20%; this is the standard, most common, rate of VAT. This applies to the sale of standard-rated goods or services.

5%; this rate only applies to certain supplies, mainly fuel, power and sanitary goods.

Top 8 Reasons to embrace Cloud Accounting...

1. Available 24/7. Easy access anytime, anywhere with just an internet browser. No need to worry about which operating system you use to access your software. Accessible from your PC, laptop, Mac, tablet, iPad or any mobile phone.  In the office, on the move, at home or even on holiday, your financial information is always available to you.

2. Easy to understand and intuitive to use. Written with the Cloud in mind rather than based upon a traditional PC software means the language used is modern and easy to understand compared to the traditional software which used confusing accountancy jargon.

3. Easy to test and experience for free. Most Cloud systems allow you to play with the software for up to 14 days (and sometimes longer) completely free of charge and with no commitment.

4. Once you do decide which cloud based software is best for your business you just pay a small monthly fee. There is no need to buy expensive software and pay upfront. The small monthly fee also includes all upgrades, updates and back up. No annual contract so you can cancel at any time.

5. Cloud based software links to Apps which can improve the accuracy of your data inputting such as:

a. Create and send your sales invoices while on the move from your mobile phone  and the system tells you when they are opened by your customer.

More on Making Tax Digital...

At Wood and Disney we consider ourselves to be a pretty progressive and modern firm. At least compared to most accountants anyway. From a digital standpoint, we know our website stands out from the crowd and we regularly update it with news and blog items that we think are important to our clients. We’re on top of social media too, consistently sharing across Twitter and Facebook, and on last count our app had over 2000 downloads. All in all, we think we are pretty savvy when it comes to digital matters. That’s pretty lucky when you consider the changes being made to tax.

2015 saw the release of HMRC’s ‘Making Tax Digital’ policy. It highlights the fact that technology has become such a major part of all our lives, from online weekly shops to booking tickets for shows. Businesses across all sectors are embracing digital marketing in various ways as well, and investing in cloud accounting software that simplifies services. David Gauke MP, the Financial Secretary to the Treasury, is behind the move, and claims to be bringing ‘The digital revolution to Whitehall’. As businesses begin to integrate more and more digital processes into their business, it is his view that tax should follow suit.

Register of People with Significant Control (PSC)...

From 6th April UK Companies and Limited Liability Partnerships (LLPs) will be required to identify and record the people who own OR control their companies or LLPs.  They will need to keepa PSC Register as well as their existing register of directors and register of members.  They must then file this PSC information with Companies House and will be publicly available.

Designed to increase transparency over who owns or controls UK businesses, it will support law enforcement agencies in anti-money laundering operations.
So if you are a director of a limited company or a designated member of an LLP you will be required to:

1. Identify the People with Significant Control (PSCs).

2. Confirm their contact details.