By 2020, most people will be filing their tax returns online rather than by post. That's not a problem for Ping clients, as we're already geared up to go digital. But there are a few other changes that will be implemented at the same time that you'll need to be aware of.
As part of the Making Tax Digital initiative, the government is going to change the way we file returns.
Instead of a once-a-year tax return, HMRC will require quarterly profit and loss information. So, that’s four times a year – just like VAT. You’ll be keeping exactly the same records that you do now, but you’ll be reporting every three months rather than twelve.
For Ping clients, that means we’ll need to know all your income and expenses during each quarter so that we can make the necessary financial data available, on your behalf, to HMRC. As well as your bank statements, we’ll need to see receipts for the expenses, whether they’re provided physically or electronically. (We can point you at some of the better apps and software packages you’ll need to do this if you’re not already digitising everything.)
Once we have everything for the quarter in question, we will be able to make sure that you’re claiming for all the allowable expenses that you are eligible for and that your figures are absolutely correct.
If you don’t file in time there could be an HMRC penalty, so letting Ping handle your quarterly reporting will make sure you always meet that deadline.
If you’re not with Ping right now, get in touch and we can help you put everything in place to keep you on track seamlessly when the new changes come into force.
A ‘cash basis’ system
The new tax system will be known as a ‘Cash Basis’ system and will also allow tax to be paid to HMRC on a pay-as-you-go (PAYG) basis. Essentially, it means that businesses need only calculate their profits based on receipts and payments, which is far more straight forward than the more complex system that currently exists. When integrated into the Government’s new ‘digital tax accounts’, the system will really help to simplify tax, make budgeting and cash-flow easier through near real-time reporting.
Eventually it will remove the need for the traditional tax return at the end of the year for almost everyone. As an added bonus, keeping more on top of your bookkeeping (although it sounds like more work) will avoid those last minute scrambles to update records and keep you far more in control of your cash flow.
You’ll also be able to see a complete financial picture of your tax affairs in one place — your digital account — and all your liabilities and entitlements will be clear to see and manage more effectively than ever.
Find out more
If you'd like to know more about how the new tax system will impact on your business just give Ping a ring or email us and we'll be happy to talk you through it. Or you can check out the HMRC site here.