17 December 2017
Making Tax Digital: Get yourself prepared
In a recent report by HMRC, seven out of ten small businesses are uncertainabout Making Tax Digital and what is means for them.
Despite originally being pencilled in for April 2018, HMRC’s Making Tax Digital (MTD) Scheme isn’t due to go live now until 2019 for businesses over the VAT threshold and then not until at least 2020 for those who are not VAT registered.
This seems to offer plenty of time to implement the changes. However, as every business owner knows, time flies, so it’s best to prepare yourself as soon as possible.
Here’s what you need to know to get yourself ready for MTD.
Quarterly Submissions and a Digital Account
In practical terms, the MTD scheme will require businesses to make quarterly tax submissions to HMRC, rather than submitting information once a year. Each business will be given a digital tax account into which financial data will flow.
By introducing the scheme, the government hopes to modernise the tax system, making it “more effective, more efficient and easier for customers to comply”.
What are the benefits?
Keeping a closer eye on tax
In all likelihood, the scheme will have the positive effect of helping you and your business to keep closer tabs on your tax affairs – as your records will be updated more regularly, rather than dealing with tax at the end of the year.
Taking the surprise out of the tax bill
Those potentially debilitating surprise tax bills could become a thing of the past. Moreover, as our partners at Xero point out here, the new schedule should give you ample opportunity to reduce your bill through tax planning.
The government and HMRC are also keen to stress the benefits of the digital account, which will allow businesses to view a “comprehensive” picture of their liabilities and entitlements in one place. This will save businesses a considerable amount of time and should make it easier for them to keep on top of their finances.
A step towards a paperless office
The MTD scheme will also allow you to declutter your office, become more resourceful and contribute to the global environmental effort in a single stroke. Submitting your tax information online ultimately means less paperwork. It is a much more efficient and quicker way of managing your finances. And, using less paper can only be good for the planet.
Are there any drawbacks?
MTD is intended to make tax more efficient and be beneficial to businesses and individuals to help get their tax right. After the scheme takes effect, you will be required to submit your tax information online by means of cloud-based accounting software or the HMRC’s own app.
Investing in new systems
Adopting cloud-accounting software could be seen as a drawback for businesses with limited resources, as it does represent a business expense. However, investing in an online accounting software solution can increase overall efficiency, save you money and streamline accounting and other business operations. Rather than being an extra expense, it is likely to represent a shrewd longer term investment.
You may have a workforce who is not particularly tech savvy. MTD could seem like a daunting prospect, but it doesn’t need to be. Online accounting software providers such as Xero, offer a range of support functions and Xero certified accountants can provide all the training you need to get you up and running.
There will be more deadlines to contend with, true. However, while this may appear to create more work in the short term, businesses will start to see the benefits over a longer period as they become more familiar with the MTD scheme – especially if you enlist expert help to ease you into the new regime.
Get yourself prepared
2019 may seem like a long way off, but it makes sense to starting preparing for MTD today. RWB can offer in-depth advice to help you plan for MTD and moving your business to accounting online. Along with our partners at Xero, we are experts in every aspect of digital tax. Contact us on 0115 964 8860 or email firstname.lastname@example.org to find out how we can help your business.
The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.