Getting up to speed with the new digital tax system
The government has outlined its plans to modernise the tax system and a key part of that will be introducing digital tax accounts for millions of businesses. In theory, it should be a simplifying process that takes away much of the pain out of filing returns, by bringing together each taxpayer’s details in one place like an online bank account.
However, past digital developments have proved troubling for individuals and micro firms. Industry body the Federation for Small Businesses (FSB) canvassed its membership at the turn of the year and said that members were deeply concerned? with the move to enforce compulsory online quarterly reporting of their tax submissions.
The FSB feels more needs to be done so that the new system is simpler to adhere to, with businesses able to choose the best tax system based on appropriateness.
There are, of course, teething problems when any new system like this is introduced we saw it with PAYE changing to real time, when businesses did have problems, so it is important small business owners become aware of the switch and what it will entail ahead of time.
As it stands now, five million small firms and ten million individuals have access to their own digital tax account, with the aim to have every small business having one by the end of the next parliament.
The advantages to this new system will be plentiful. It will have more automation, picking up information from a host of different places and if you have a pensions provider tax calculations are done on an ongoing basis.
You’ll be able to see all the important information in one place the current setup has it spread across numerous different services and you have to collate it yourself.
This should mean good things for cash flow management, with business owners able to see the amount of tax to pay, with the ability to spread payments across the year a real plus for seasonal businesses for example.
The other big help for small firms will be the ability to link their accounting software to the personalised tax account. This should mean much less chance of human error or typos, with the business owner putting less amendments through. It should be a lower cost, as the current arrangement sees accountants charge firms extra for amendments.
Bivek Sharma has been a partner with KPMG for over ten years, specialising in accounting, tax and software. He started the Small Business Accounting division over two years ago with a goal to transform accounting services for small businesses. The team works with a huge variety of industry sectors and companies including coffee shops, technology companies, manufacturers, pubs, restaurants and retailers.
In response to confusion amongst the British micro and small business community regarding the upcoming quarterly digital tax returns, Business Advice asked Xero's UK MD Gary Turner for more detail. more»
Speaking at the 2015 Autumn Statement and Spending Review, George Osborne unveiled plans for a digital revolution? at HMRC and promised every small business access to a digital tax account for the 2016-17 tax year. more»