In the BKN weekly update it said this (my emphasis)
Digital tax accounts
At the Spring Budget 2015 the government announced proposals for the introduction of personalised digital tax accounts to replace the current annual tax returns system. The government has now announced that companies, unincorporated businesses, self-employed people and landlords will all be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology and will include features which will prevent errors and promote compliance. The measure will not apply to employees, or pensioners, with a secondary income source from self-employment or property and whose gross income from this secondary source is under £10,000 per year.
Does that mean we can no longer use desktop software or spreadsheets to do the accounts? I did know about the quarterly requirement so it's January 4 times a year now, which is stupid in itself but not entirely unmanageable. What worries me is there will be a big push for people to do their own accounts using the cloud, but unless they have an understanding of accounts, will lack the ability to ensure that stuff goes in the right place. I did someones accounts as a one off from their cloud software and they'd raised a new share issue every time they put money into the business. Fortunately I was able to correct it and put it to the DLA. Not the cloud providers fault exactly, but the technical jargon is dumbed down so it was an easy mistake to make.
Finally, how will submitting quarterly Ltd Co accounts work. Given that it can cost anywhere between £400 - £2000 in accountants charges, will that mean a triple or quadruple cost to Companies? Will you still have 9 months from each quarter to file accounts or is this likely to be scaled back and we'll have to file both SA's and Ltd Co's much sooner?
Will this be the kerplunk episode do you think Shaun?
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I dont think it is the intention that Ltd companies, or anyone else for that matter, has to submit their accounts on a quarterly basis.
It is just a requirement to "keep a track of their tax affairs digitally" that is being requested.
How this will all work in practice I dont know but sure the detail of how it will all work will come out over the next few years. I would expect that individuals will still have to submit their actual figures once a year and the quarterly submission will be a best guesstimate or based on the previous year submission where applicable, effectively how payments on account work at the moment.
As with most new things eg self assessment nearly 20 years ago, their is a big hulabaloo about what will be the impact and how it will work in practice but after it is introduced and been in practice a couple of years you will look back and say what was the big fuss all about. Much the same as all the current hype regarding auto enrolment on small businesses.
actually, my view is slightly different to Marks on this in that I'm seeing this as HMRC thinking that VAT is filed quarterly so why can accounts not be filed quarterly increasing the speed with which the treasury is able to harvest their tax.
My great worry is that for smaller non VAT registered companies its already a nightmare trying to get all of the documentation out of them once a year. Will moving that to quarterly (a) make the process seem less of a daunting task so they are more compliant or (b) will if be just the same as now four times a year rather than one!
There is an undercurrent in the Governments announcements that also makes me wonder the distance between a quarter end and filing. Do we get a month (certainly not nine!!!) as with VAT or are they expecting something similar to RTI on the filing timings which to my mind would be totally unreasonable.
On the software front I still think that we will be able to use our own software. Accounts for a company are filed on an annual basis with companies house but VAT returns are done quarterly and we still use the same software..
I am as I say considering these proposals similar to the quarterly VAT where our software gives us the figures for that quarter that we weither file from the software or plug into an HMRC front end.
The more worrying rhetoric coming from the Government are the throw away lines about gathering information from "other sources" which combined with other changes in legislation I believe to mean them looking directly at bank accounts and software making assumptions and judgements about the income and outgoings.
I can see capital injections and the idea of DLA's blowing the mind of the software used in coming up with their tax demands which must be challenged within a short period after the demand is made.
Smaller businesses will like as not take this on themselves much as many do their own VAT returns and then we mop things up with the final accounts at the year end.
For businesses where we do the VAT returns already I am not seeing there being much additional costs (but there will be some and clients need to be aware of that).
For businesses where we do not do the quarterly VAT returns then they need to be taught a different way of looking after their documentation (i.e. monthly incoe and expenditure sheets with invoices and receipts attached to each sheet).
Those one's also need to realise that we will need to charge them more for the extra work... As yet how much more is unknown as we don't have the details of the filing expectations on this.
There is no doubt that this will make our jobs more complex (again) and this extra time cannot simply be consumed free of charge. The issue here is how much extra time will it take and will this force clients to file their own returns. If so that could have a really detrimental effect on the smaller client stock available to us (I am not seeing issues further up the food chain of people taking returns in house).
As Mark says, until we have some concrete details there is no point getting "too" concerned about this. But similarly it is right that we start discussing this and sharing information the way that we did with RTI which was another example of the Government making initial announcements with no concreete underlying detail.
Is it a Kerplunk moment... I'm certainly seeing this as a major change which may result in a change to the way that we work with many of our clients. And I can see many clients needing to take this on themselves regardless of their level of competence.
If that happens with some of my clients I would dump them completely as accountancy is not where their skills lie and their businesses do not make enough money to pay me to clean up the resultant mess. (if they could afford it then they wouldn't have been doing their own filing in the first place).
As for the cloud I'm not seeing a link between these changes and that. As mentioned above, we file VAT online quarterly but that does not mean that the software that we use to calculate the VAT is non desktop.
Interesting Saturday morning discussion John.
Laters,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Yes, I'm sure the devil is in the detail. It's the keeping track of your affairs digitally that made me sit up and take notice. If that's just a question of a "guestimate" on the current situation and has no impact on tax payable then fair enough. Profit and loss sheet perhaps with all the capital allowances, depreciation etc etc done once a year. But wouldn't that make quarterly accounts meaningless? What possible benefit does that bring the Govt?
I hope you're right, and it turns out to be a lot of hulabaloo.
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
