By 2020, the majority of businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and to update HMRC at least quarterly via their digital tax accounts.
Business owners need to start planning now for “sweeping changes” to the way they file their tax returns, a Liverpool city region accountant has warned.
By 2020, the vast majority of businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and to update HMRC at least quarterly via their digital tax accounts.
The Government initiative, called ‘Making Tax Digital’ will bring about the demise of the annual tax return.
In order to comply with the new legislation, businesses will be required to use digital tools, such as software or apps, to keep records of their income and expenditure.
The tools enable business owners to build a comprehensive view of their tax data, flagging up possible errors and offering prompts for information that may otherwise be overlooked.
Phil Bates, principal of Wirral, Cheshire and North Wales accountants Phillip Bates & Co, said: “The new digital system will be implemented from April 2018 to 2020, but business owners need to start preparing now.
“Some SMEs will already be using an online accounting system, but the majority will not and they need to start making the transition over the next 12-18 months.
“The ‘Making Tax Digital’ initiative will revolutionise the way businesses manage their accounts and tax affairs and, ultimately, has the potential to streamline and make the whole process more efficient. For example, you will no longer have to wait until the end of the tax year to discover how much tax you need to pay.
“But in order to get to that point, most businesses will have to go through a significant period of transition.”