SMEs should prepare early for the ‘tax return revolution’
5 January, 2017
Small and medium-sized enterprises (SMEs) are being reminded to keep up to speed with, and prepare early for, a mandatory tax shake-up described by some as the biggest change to UK tax systems since the advent of PAYE.
With the Government due to publish finalised proposals regarding its Making Tax Digital (MTD) project any day soon, several reports have reached the surface urging SMEs to be on their toes – as MTD will affect the majority of businesses, and unanticipated U-turns on, or additions to, previous proposals are still a possibility at this stage.
Several studies suggest that many businesses are unaware of Making Tax Digital and have not yet begun preparing for its implementation or assessing the potential impact the mandatory systems overhaul could have on their enterprise.
As it stands, SMEs effectively have only one year to completely change the way that they keep financial records and submit information to HM Revenue & Customs (HMRC).
This is because Making Tax Digital is expected to be phased in with Income Tax and National Insurance Contributions (NICs) for large businesses from April 2018, shortly followed by the same changes for small businesses and ending with a full roll-out for Corporation Tax.
By 2020, MTD will have effectively abolished the old-fashioned tax return as we know it.
SMEs will no longer be able to leave their tax matters until the end of each financial year, as companies will need to be pro-active and report to HMRC on a quarterly basis. Firms will also be free to make voluntary payments under a new ‘pay as you go’ scheme.
The only businesses exempt from Making Tax Digital will be those that earn less than £10,000 a year. If you are concerned that your business will be affected, it is important to seek specialist advice about what you may be able to do in order to prepare sooner rather than later.