In a recent survey conducted by the ICAEW, a nationally representative sample of 500 UK businesses were asked how they keep their financial accounting records at the moment. The results showed that just 25% currently maintain their accounts electronically using accounting software. The rest will therefore need to consider what changes they may need to make, almost certainly incurring considerable costs to comply with the new rules.
From April 2018, small, non-VAT registered businesses will be the first UK businesses to have to comply with Government’s new proposals for Making Tax Digital, announced first at Budget 2015. The rules will make digital record keeping compulsory, in addition to a new requirement to make four returns of information to HMRC each year. By 2020, all businesses will be required to keep records digitally and to make four returns each year.
Further analysis revealed that a greater burden falls on sole trader businesses, with 82% of these one-person businesses needing to make the move to digital record keeping. Most of the burden will fall on the manufacturing and construction industries, where 41% still rely on paper-based records.
Credit: ICAEW Tax Faculty Team, 11 March 2016