There seems to be a trend supporting the movement of our computer software and data to the “cloud”. Not the fluffy white variety, but servers that are based off-site.
Even our tax system is pushing us in that direction. If and when the government’s objective to Make Tax Digital is finally realised, each of us registered to pay tax in the UK will have an online Personal Tax Account, and all our income sources and other details will be connected to it. So instead of waiting for us to submit an annual tax return to gather data, HMRC will receive everything it needs to know about our business and personal financial affairs via a direct, computer link.
Making Tax Digital for Business is just one aspect of that gradual change process.
Based on current plans, HMRC aim to require all businesses to link up their accounts data with its computer servers during the next three to four years. These data transfers will be required quarterly rather than annually. The aim is to provide you with an estimate of future tax payments based on real time data rather than prior year figures.
Although this process will eventually mean that annual tax return submissions are abandoned, the actual process of maintaining and checking records, and then making the data transfers, will create more work for business owners and their advisors, not less.
Initially, business owners (and this will include landlords) will have to consider how they are going to record their business transactions in a format that can link to HMRC’s computer networks. Most accounting software providers now offer a cloud based solution that will eventually have the functionality to cope with the demands of Making Tax Digital.
And there are other advantages to using cloud based software. For example, as advisors, it is a simple process for us to login to your software and help you with any queries you may have, or to keep an eye on your trading situation. This could be extended in due course to monitoring your accounts data before uploading summaries to HMRC.
If you are still considering your software options, we would be happy to help. The old maxim “be prepared” is still relevant, in fact more so in this electronic age.
Source: New feed