What will Making Tax Digital mean to your business?Published on 7th December 2018 2018-12-07T12:00:00+00:00
Making Tax Digital is a government initiative coming into force on 1 April 2019 for businesses with a turnover of more than £85,000. What will it mean for your business?
The quarterly VAT return has been a feature of business life for as long as most of us can remember. The rate may go down, or more often up, but the need to complete the return on time, and make sure it gets back to the revenue's office with your payment, remains one of the constants of business life.
The annual return is just as predictable and even more demanding.
But things are changing, thanks to a government initiative - Making Tax Digital, or MTD.
What is Making Tax Digital all about?
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right – and make sure we all pay what we should.
The government’s own figures suggest that around £9 billion is lost to the revenue each year.
HMRC’s has introduced the Making Tax Digital scheme to make fundamental changes to the way the tax system works. In the long term, it means that all tax we pay as individuals or as a business will be managed digitally online. The plan was originally to introduce digital record keeping for all, while also bringing in quarterly updating for landlords, the self-employed and businesses. This would cover self-assessment, corporation tax and VAT. However, this means such an upheaval that the government are phasing it in, starting with VAT.
You'll need to record all your transactions and send HMRC an automated nine box VAT return at the end of each period, directly from your software. It's actually meant to be a simpler, more efficient process that will be easier for your business in the long run.
Making Tax Digital for business (MTDfb) will become compulsory from 1 April 2019 with MTD for VAT. From that date, VAT-registered businesses with a turnover above the threshold of £85,000 will have to keep digital records and submit VAT returns using compatible software.
Other components of Making Tax Digital, such as income tax and corporation tax, have been placed on hold until April 2020 at the earliest, until such time that the VAT system can be expected to be working properly.
So what do these changes actually mean for you and your business?
What it means is very simple - you need to be digital. Most small businesses are – but if you keep books on paper, and you meet the turnover requirements, you will need to start using your computer to take care of your accounts.
All businesses affected will have to use software that reports to HMRC.
There is no use complaining that the system has worked well enough for years and that keeping track of accounts with double-entry is adequate for your business. You will not have any choice.
If you have not already done so you will need to go digital and to adopt suitable software. The time to start getting organised is now. The last thing you want to do is discover that you can’t pay your VAT bill, and are being investigated by HMRC as a result.
But if you have not already done so, automating your tax and your accounts can actually help you run a better, more efficient and more profitable business.
What can accounting software do for you?
Running a small business can leave you with so little spare time that you fail to focus on accounts. The temptation is to leave them to your accountant or bookkeeper, and present them with a pile of invoices and bank statements.
Leaving it to them, and even paying for their time, might seem preferable to trying to do things yourself. You could spend a lot of valuable time each month trying to get everything done.
Using accounting software instead of spreadsheets and paper notes to process your accounts not only saves precious time – you can take minutes instead of entire days – it can help you see exactly what is going on in your business.
So, not only can you get your weekends back, you can use your software to keep on top of unpaid invoices and any cash flow problems before they become serious.
What’s more, as your business grows and you start taking on employees, and you need to deal with payroll, your software will be able to provide the answers for you and for your staff. And by using a software solution that is fully HMRC compatible, you’ll know you don’t have to worry about the taxman for your payroll affairs.
Plus of course, your software will be ready for Making Tax Digital. Getting up to speed with the new requirements will be simple.
What about the costs?
The costs of going digital may not be too great. Most computers will be more than capable of running the software – and the software itself can be available as a service, with a subscription.
At Rangewell, we can help you find the answers you need with funding scaled for your business now, and to help it to the next stage. We can provide answers not just for computer hardware - but for the for the software you want to run on it too.
Call us now and make sure your small business is ready for Making Tax Digital.
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