“One side is the ability to reduce the amount of tax lost each year. The other is that we are trying to nudge and cajole businesses into doing things digitally. It is about the benefit your clients could achieve from being more digital.”
Those are the words of Mark Fisher, one of the architects of HMRC’s Making Tax Digital (MTD) initiative. MTD is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. In time it will mean the end of the annual tax return for millions. So, we know it’s happening, but who is affected and what are the key points?
- MTD starts April 2019 for all businesses above the VAT threshold (currently £85,000)
- All records must be “digital”
- All other businesses likely to start by 2020
- You will need to take action NOW!
“We have long extolled the virtues of digital accounting and believe this is an exciting and positive step further into the digital age for UK plc “
Allan Wilson, Director, Wilson Partners
Come to one of our FREE Digital Accounting Workshops
We’ll give you an opportunity to see Xero in action and we can cover any questions you’ve got – including Making Tax Digital.
Intro to Cloud accounting
Q&A including MTD
How can Wilson Partners Help?
- Provide you with digital accounting software
- Train you to enter your data easily
- Submit the data/reports required to HMRC on your behalf
- Make the process cost effective to your business
- Help you on the path to digitally transforming the way you do business
- Certified trainers and a Gold Partner of Xero and have converted many other businesses already
- We recommend Xero as one of the leading providers of digital accounting to small and medium sized businesses
- Is it time for a demo?
The benefits of digital accounting
- HMRC compliant
- See your realtime data 24/7
- Enter and view data “on the go”
- Automatic bank feeds, so cash position always up to date
- Secure data protection with bank type encryption
- Real time information
- Plethora of plugins for forecasting, managing and improving cash flow
- More time to focus on your core objectives
The benefits of Digital Accounting are manifold, but for many of our clients who made the change, they have never looked back. Check out our case studies and get in touch to book a demo.
Making Tax Digital - FAQs
Making Tax Digital (MTD) is the Government’s vision for a ‘transformed tax system’. The aim is to create a more modern, digital service which will help businesses get their tax right, with technology making it easier for them to do so. HMRC estimates that over £9 billion is lost annually in tax due to errors and mistakes, and it hopes that digital record keeping will help ‘to prevent errors associated with manual processes.
HMRC’s systems are in need of replacement with different systems for PAYE, Self Assessment, VAT etc. Their new systems will have one digital account per tax payer for all information.
HMRC believe it will reduce errors and administration and speed up payment of taxes with “voluntary pay as you go” whilst reducing the tax gap with regular quarterly filing.
There is an expected delay of one year (so starting April 2020) for anyone below the VAT threshold. Specific exemptions apply to charities and the digitally challenged. Everyone else must comply by April 2019.
Hand written cash books and ledgers – are not digital
Spreadsheets – are digital but only in association with applicable software (they are not digital on their own)
Desktop software – is digital but only in association with applicable software (not digital on its own)
Cloud accounting software such as Xero – yes this is digital!
According to HMRC “Software will help businesses to stay on top of their record keeping, allowing them to better understand how their business is performing”.
Always knowing where you stand when it comes to tax
Having access to tax information online in a single place
Being able to work online collaboratively with your accountant
Being able to plan and budget more effectively
No. The new regulations state that businesses must keep digital records in compatible software, which can connect to HMRC via an Application Programming Interface (API).
The regulations state that any business undertaking MTD must use a compatible software to meet the new requirements. So, if you are not currently using a compatible software package you will need to purchase software. An alternative option is to get your accountant to maintain your records and file your VAT return on your behalf.
Assess whether your accounting records meet the definition of digital. If they don’t you need to take action now and make a plan for ensuring they do.
We would recommend that your VAT return periods tie into your financial year end. For example, if you currently submit VAT returns for the periods Feb-Apr, May-Jul, Aug-Oct, Nov-Jan but you have a March financial year end then you should arrange with HMRC to change your VAT periods to end March, June, September, December.
If in any doubt over what you need to do then speak to us.