Digital Taxation Laws 2018
Digital Taxation Laws: Major New Updates to the UK Tax System
In January 2017, HM Revenue and Customs published a document which revealed a set of new taxation laws that are scheduled to come into place in 2018. The current tax law will undergo massive changes which self-employed workers and landlords will need to be aware of. These changes enable HM Revenue and Customs to provide a service which is keeping up to date with the major digital changes we have seen in the past few years. It will help to simplify business tax and taxation laws for corporate businesses, while also enabling a voluntary pay as you go taxation system.
The consultation paper is fairly lengthy and has much information to digest. It is also worth noting that the HMRC are still working on several of the proposals, so more changes may be published in the coming months. HM Revenue and Customs also encourage business owners to respond to the suggested changes, so that you can have your say and help them to provide a better service. We reveal some of the most important changes that you need to know about making tax digital for small businesses so that you can prepare your business for the upcoming changes.
Making Tax Digital For Small Businesses
The most significant change to the way that tax will be done is that making tax digital will affect the self-employed, landlords and all other firms that are not registered as limited companies. HM Revenue and Customs are encouraging all businesses to move towards storing their records digitally, as opposed to on paper. They are currently working on providing several free tools and potentially some online training courses, which will help those who are not sure how to keep records digitally. Businesses will be asked to store files on a particular app or software, which will contribute to reducing the number of unexpected errors during the accounting process and allow users to manage cash flow better. Summary data from these apps or software will then be sent directly to HM Revenue and Customs. It is suggested that businesses will have nine months from the end of the tax year to be able to make adjustments and make their final tax declaration.
Exemptions to Business Digital Tax
There are several exemptions to these new laws. One major one is that any business who gross less than £10,000 gross turnover will not be required to undergo these new taxation laws. There is also a clause which suggests that anyone who has a genuine difficulty in completing digital taxation may also be exempt from this change.
How Will This Affect Your Business?
One of the main ways it will affect the running of your business is the costs that are associated will additional training to bring staff members up to date with the new changes, and also to train them how to use the software. There may also be some additional charges associated with the new software, plus you may have to hire additional IT support. As well as software costs, you may be required to purchase additional hardware items such as computers, laptops and other devices. Other potential additional costs include things like meetings and extra support with accountants and tax agents, the cost of the time spent on these matters, and the time required in the nine-month period where changes are allowed to submit the tax reports.
Voluntary Pay as You Go System
Another change the system is that businesses will now be able to pay on a voluntary pay as you go basis. HM Revenue and Customs will not be making changes to the existing payment dates, but they will allow owners to make more regular payments should they wish to do so. There will be some adjustment that will need to be done to bring your business up to date with the changes. However, this could provide to be a significant change as it will enable you to manage your cashflow better. The specific laws are not set in stone yet, but it looks like you will have the ability to control when and how much tax you pay throughout the year.
New changes are also being made to the penalties that occur for no and late submission. A stronger sanction will be made against all businesses that are deliberately non-compliant, but an additional grace period will be provided before these sanctions are imposed.
These are a few of the most important points you need to know when it comes to changes in Business Digital Tax laws; you can read the full report and get more information here.