A digital tax revolution is on its way, writes Jono Wilson of Barnett & Turner. But what will the impact be on small businesses? The way in which everyone files tax returns is set to change dramatically and it’s going to have a massive impact on businesses – particularly the smallest ones.
The Government has stated its intention to move over to a completely digital system and quarterly reporting of tax to HMRC. There’s a consultation under way on the scope of digital reporting, but right now there’s very little detail of how everything will actually work in practice.
So what impact can we anticipate? Well, the first thing to say is that everyone will have to use digital tools such as recognised accounting software or digital products provided by HMRC. The days of keeping records simply via a cashbook in Microsoft Excel are sadly over.
The cost of a cloud-based package is probably going to be at least £10 per month. And that’s if you’re comfortable that you have the time and necessary skills to use the software. If not, you may well end up paying your accountant to do the work for you. (Many accountants, however, may be wondering exactly how they can provide the right kind of service in a way which remains cost effective to their clients.)
Of course, there are potential benefits to the idea of regular tax filing. No one likes it when a large annual bill comes around and has to be paid retrospectively. But in many businesses – particularly seasonal ones such as to agriculture, fishing and tourism – it’s very difficult to generate a steady, quarterly stream of income. As a result, paying tax quarterly could be a challenge, although this is what the new system is geared towards encouraging.
There’s another issue which needs to be considered too. Broadband connectivity in some more rural parts of the UK is still limited. Although there are promises to roll out high-speed internet links, the targets set in some places will still leave a significant proportion of the population without access. In a number of locations, even 3G is unavailable. And those reliant on satellite broadband have to be very careful with their usage, because of spiralling costs.
There may also be people – because of their age, a disability or some other reason – who find it difficult to cope with the technological innovation. What protection are we going to be offering to them?
If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at firstname.lastname@example.org