Over the last few years HM Revenue and Customs have passed the responsibility on to Business Owners to submit electronic data to the HMRC servers. VAT, Corporation Tax, PAYE and National Insurance and Personal Tax Returns all have to be submitted online.

 *The only exception to this is Personal Tax Returns which you can still send via paper form – but your deadline will be October rather than January!*

The PAYE system has kind of been HMRC’s guinea pig with the introduction of RTI (Real Time Information). Designed to make PAYE submissions more efficient, RTI means that you submit information in real time, every time you pay your employees – who has been paid, how much they were paid, and most importantly how much tax is due. In reality, this has caused a great deal of stress and frustration for many Owner Managers and Bookkeepers.

Why would they do this?

HMRC wants to collect tax quicker. By knowing exactly what you owe each month it empowers HMRC to come and get it from you quicker.

Payroll is only the beginning. In the last month, the outcome of six HMRC consultations have been released, all on the topic of “digitising tax” for individual tax payers and businesses. We can assume that HMRC will be seeking profit figures from businesses more often. It won’t be long until you need to submit figures to HMRC quarterly, rather than just relying on the year end accounts.

So what will you be willing to show them?

At the moment, we can only hazard a guess at what will be put in place to gather this information, and when action will be implemented. But, looking at the speed with which HMRC have implemented changes over the last few years, I’d advise you to be ready and not be taken by surprise when this change comes in.

The majority of day to day accounting systems record the initial data well, but it’ll be more important than ever to make sure your management figures show a true reflection of what your business is doing, and equally important that you know the impact this information would have if HMRC were to see it.

Do your management accounts show a true reflection of your drawings from the business or is “Directors drawings” a dumping ground for anything your bookkeeper doesn’t know?

You may be used to quarterly digital reporting of VAT, but this requires a basic form that actually gives HMRC limited information. When they ask for information on business profits throughout the year, that profit figure could be affected by a huge number of factors, and they’ll be looking to see this.

So, what to do next?

  1. Move to Cloud Accounting. We have written a few blog posts on this topic: What actually is the cloud? and 5 Reasons to switch to the cloud are good examples.The days of having Sage installed on one computer are over. The likelihood is that cloud accounting packages will lead the way with reporting to HMRC, but are also the easiest way to…
  2. Get A4G to review your management figures. By reviewing how your bookkeeping looks now we can give you a good idea of what might need changing to make sure the figures accurately represent your business to HMRC, whilst at the same time providing you with information to help you manage your business and plan your taxes for the year.

Don’t quite understand? Like A4G to review your management figures? Take the next step and contact Josh today.

Contact me today!

Josh Curties

BA (Hons) FCA

Partner & Principal Adviser

01474 853856

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