‘adapting to change – digital tax accounts’

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Ian McMonagle

Chartered AccountantsChartered Tax Advisers

Business Development Specialists

Adapting to change:

Digital Tax accounts

The most significant single change affecting individuals and small businesses in the history of our income tax system

“During this Parliament, HMRC will make fundamental changes to the way the tax system works — transforming tax administration so it is more effective, more efficient, and easier for taxpayers.”  David Gauke MP Financial Secretary to the Treasury

“Much more than simply adding digital tools to the current system; it is about transforming the UK tax system”

- David Gauke MPFinancial Secretary to the

Treasury

• 50 million individuals will have their own Digital Tax Accounts

• Pre-populated by HMRC• Everything in the one place,

including Child Benefits, State Pension forecasts, tax paid

• All taxation will switch to online communication

• 4 quarterly “updates” will be required each year

• From April 2018, all small, non-VAT registered businesses and landlords must comply with the new digital reporting rules

• From 2020 this will apply to all businesses, including companies

• Mandatory digital record-keeping

• Quarterly returns(?) - similar to VAT or RTI/PAYE systems

• Online billing, aligning payments with profits made (Pay as you go)

• Tax potentially payable monthly, quarterly or by Direct Debit

• ‘Real-time’ • HMRC access to bank accounts?

‘Single Business Service’

Don’t believe the Government spin

Case study:Self-employed; sole-traderSporadic turnoverNot VAT-registeredNo employeesPoor record-keeping

Case study: Self-employed; sole-traderLarge turnoverVAT-registeredHas a number of employeesBoxes of receipts & invoices

Case study: Director & ShareholderSalaryCompany dividendsBank interestReceives Child BenefitsPays personal pension contributions

Case study: Landlord2 Furnished properties£500 per month gross rents x 2Buy-to let loansJoint title

Bookkeeping survey of 500 businesses across the UK:• 25% use software currently• 25% use a paper-only system• The rest employ a mixture of both or

use packages such as Excel

• ‘Quarterly tax reporting a threat to small businesses’• ‘Small firms will struggle with new quarterly

tax returns’• ‘This should be a voluntary scheme for small

businesses’• ‘HMRC should undertake an impact

assessment and consultation exercise’

‘Should be a matter of choice and should not be made mandatory’

‘Businesses should be able to move to digital over time’

Your call to action:• Ditch the bad habits• Adopt good practices• Bookkeeping• Embrace software• Change now

Thank you for listening

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Ian McMonagle Questions?

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The Business JourneyThank you for your attendance. Next event30 August 2016