Bitcoin Tax Bills Set to Land on Tech-Savvy Investors
February 14, 2018
By Rachel Warriner, Corporate Tax Manager at RMT Accountants & Business Advisors
“In a digital age, it is right that we develop a digital tax system.”
So said Chancellor Philip Hammond in his recent Spring Budget speech as he announced a year’s delay in the implementation for smaller businesses of the Making Tax Digital initiative that has been high on the Treasury and HMRC’s agenda for the past couple of years.
In the government’s own words, Making Tax Digital “is a key part of plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.”
The idea behind it is to allow the taxation process to be conducted in real time by making better use of information through a single financial account, much in the same way as many of us now do with online banking.
Digital interaction is the key to the future. Prompts, advice and support through webchat and secure messaging will be made available, while digital record keeping software will be linked directly to HMRC’s systems, allowing businesses and individuals to send and receive information directly.
HMRC has been consulting widely over its plans, with a view to (rather optimistically) having everything fully operational by 2020.
But while the aim is to make the taxman’s gathering of information more efficient, there are, as things stand, many issues to address if unnecessary confusion and stress is to be avoided, and it rather seems like the beneficiary of the new ways of working will be the taxman, rather than taxpayers.
In the first instance, anyone working in the finance function of even a relatively small business, let alone a large one, knows only too well how difficult it can be to extract the invoicing, expense and other cost information you need to do your job from colleagues who are already busy with 15 other things that are more important on their daily To Do lists.
Shortening the timescale in which you need to access this information, and asking them for it more often, is going to require a major culture change in many businesses, and one which will require you to have owners and senior managers onside from the very beginning – after all, it’s them that will be paying any fines or penalties that come in as a result of missed deadlines or incomplete submissions.
Company’s internal controls also need to be up to the job, and preemptive action taken now to ensure that they are should help avoid issues arising later.
Variations in year-on-year or even quarter-on-quarter revenue levels could get the attention of the algorithms behind HMRC’s new technologies, which may then put you on their radar when there’s no reason to be, while major payments you make to related parties or repayments you receive covering areas such as research and development tax incentives could have the same outcome.
Your company’s use of any particular tax schemes also needs to be presented as transparently as possible, most especially if they are designed to reduce your overall tax bill, and the salutary lessons that many high-profile individuals and businesses are currently learning after investing in schemes which turned out not to be legitimate should be noted by everyone.
Whatever the challenges, “the government is committed to reducing burdens for taxpayers and building a transparent and accessible tax system fit for the digital age” which means that, sooner or later, Making Tax Digital will be in place and part of our daily lives.
The most sensible course of action is to proactively prepare for this day sooner rather than later, examine your finance functions to ensure that they’re up to the job that will expected of them and take expert advice on how any gaps or particular areas of concern might best be addressed.
RMT provides the full range of financial and business advisory services through its specialist tax, accountancy, corporate finance, healthcare, information technology and recovery & insolvency teams, and works with firms of all sizes both within and outside the North East.