Making Tax Digital (MTD)
Despite the Scepticism and Belief that it will not happen; HMRC are determined to implement Quarterly Corporation Tax Returns in April 2021; and Quarterly Sole Trader Tax Returns in April 2025(subject to £10,000 minimum turnover).
As a result, ALL businesses need to be keeping their accounts on a MONTHLY basis; so that Quarterly Corporation Tax or Personal Tax Returns can be made.
There are a number of low cost “Cloud Based” Accountancy packages that are approved by HMRC that make this job easy.
For the very small business there is Xero Start, 1Tap or QuickBooks Self Employed, all at £4.99 per month.
For all other businesses there are Xero, QuickBooks, KashFlow, Free Agent or Clear Books; all at around £18.00 per month (see special offers for less) plus Receipt Bank for processing bills. All these packages have a link so the Accountant can review the data and adjust it for Accruals, Prepayments, Bad Debts, Stock, and Depreciation; so that the Quarterly HMRC Tax Return minimises the tax payable.
It should be noted that businesses have 1 month after their Quarter End to prepare and submit the return; and a further few days for the relevant tax payment.
One will see that this has a “Negative” Cash Flow implication, as in year 1; one will need to fund quarterly tax in month 5, again in month 8, the last year’s tax in month 9, and a quarter’s tax in month 11. Clearly planning will be required to compensate for the negative Cash Flow.
It is vital that businesses look out for Seminars and Conferences covering this, as failure to comply will result in HMRC levying Penalties for late submissions, and for late payments.
Accountant, Auditor and Tax Consultant; specialising in "Cloud" based Accountancy and Forensic Accountancy. Clients require advice on ensuring that their systems are fully "Making Tax Digital"…
