“Making Tax Digital” – Part One

What’s behind “Making Tax Digital”

Hot off the press is the latest paper from the Government on “Making Tax Digital” so I thought you might like to read in Plain English what is happening and the KMA slant on what that means to you the small business owner, how it’s going to affect you what you need to do. 

It’s not great news……….

Before you groan and say really “Do I have to read this?”, I’d suggest you bear with me.  I know Tax is a very dry subject, trust me, even I find it hard going and I’m an Accountant!  I’m going to produce a series of articles on this and the implications of what it means to you, the small business owner, so keep an eye out for the next instalment.

So, what is “making Tax Digital” all about?

Over the last several years the Governments have talked about simplifying the tax system.  It recognises that a MAJORITY of businesses want to get their tax right.  The latest tax gap figures published by HMRC show that many people find this hard (not everyone has an agent).  It is estimated that over £8 billion a year in tax is lost from avoidable taxpayer errors.  The idea behind “Making Tax Digital” is to help businesses get their tax right and therefore the government gets its “rightful tax revenue”. 

Sounds good doesn’t it! Don’t be fooled…Let’s be honest, this really is about collecting more money in tax! Well that’s my thought’s anyway call me cynical!  However, from the information in the findings of the consultation I have gleaned an interesting fact.  HMRC have now stated that “Making Tax Digital” is likely to bring in an extra £2 billion in tax by 2022.  This updated estimate will be published in the Budget 2017!  Where is this extra tax going to come from, well it’s going to come from business owners like you!

HMRC say businesses will now get a clearer view of their tax position throughout the year.  So, a further thought that occurred to me is……. Will this mean THE END of the “Time to pay arrangements” we have seen in the recent past?  It will be harder to justify you can’t pay HMRC the tax due when the system shows you have made the profit and therefore the tax is due.  We all know that Cashflow is a completely different issue and many business owners fund their growth by using the money that is often set aside for paying the VAT and Tax and HMRC know this. 

I suspect that one of the reasons “Making Tax Digital” has been instigated is the pressure on the government to reduce the costs of running its own departments, HMRC being one of them.  We have seen a number of HMRC offices closed and staff made redundant or outsourced and the push to replace certain jobs with technology.  It seems a logical step to carry out some of the traditional tasks that were done by HMRC inspectors by computers checks.  We are seeing more and more computer generated Tax enquiries being opened up by HMRC.

 

In my next blog post I’ll spell out what this means for you……see you next time!

 

 

Disclaimer
This article is for general information only and no action should be taken, or refrained from, as a result of this information. Professional advice should be taken based on specific circumstances in each individual case. Whilst we endeavour to ensure that the information contained in this article is correct, no liability will be accepted by KMA Accountancy for damages of any kind arising from the contents of this communication, or for any action or decision taken as a result of using any such information.

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