This guest blog comes from our accountant and resident tax expert, Michael Bennett of Michael B. Bennett Ltd.
This is very much the topic of the moment with HMRC pushing towards this at a rate of knots, but actually not telling anybody very much about it. In a nutshell, HMRC believe that many people make mistakes in their business accounts and tax returns, primarily because there is a delay between a transaction occurring and a person recording it. Therefore they are looking to bring in a system that requires you to submit information on a more regular basis.
The information currently available is that from April 2020 you will be required to submit a return at the end of each quarter; you will have one month to make the submission and there will be penalties for not doing this or being late. There is no information about (a) what needs to be submitted or (b) how the submission is to be made.
Coupled with this is a requirement to keep “digital records” – a term as yet undefined by HMRC, however there is a strong suggestion that they will not consider an excel spreadsheet as a digital record (although I cannot see how it can be anything but a digital record).
There will be a de-minimus below which you do not have to make these submissions – originally HMRC were talking about a turnover of £10,000, although more recent drafts have said £85,000. These new rules will apply not only to sole traders, but also to partnerships, companies and people renting out property.
As we learn more about what the mechanics are for this system, we will keep you informed.