Making Tax Digital: Not being ready could cost your business thousands in penalties and interest
The government has decided that it is time for tax to step into the 21st century and go digital – from April 2019, Making Tax Digital is being introduced by HMRC. The aim of Maxing Tax Digital is to ensure that it is easier for businesses to stay on top of day-to-day accounts. HMRC are hoping to improve efficiency, effectiveness and ease of compliance and end the reliance on paper accounting across the UK.
Whilst a new and modern tax system will ultimately make it a lot easier for businesses to comply to tax regulations, it will take some time for many to adjust to the process.
Will your business be impacted? And if so, is your business ready for the change?
Making Tax Digital is the biggest change to the administration of the tax system since self-assessment was introduced in the 1990s. At DP Accounting, we have been making the preparations in order to help businesses make a painless transition.
Here are three questions that all businesses must consider:
1. When do you need to go digital?
Your VAT threshold is the most important metric in determining when you need to go digital. From April 2019, businesses with a turnover that is above the VAT threshold will be required to maintain digital accounting records and this will be for VAT purposes only.
Businesses will not be asked to keep digital records for other taxes until at least 2020.
If your business voluntarily registered for VAT, you will not be required to use Making Tax Digital until at least 2020.
There is not yet an obligation for the smallest businesses to use the system, but you are able to sign up on a voluntary basis. This means that for the time being, businesses with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
2. Have you researched your options?
Despite being so close to the introduction of Making Tax Digital, only 11% of VAT returns are filed using software. In addition, UK200Group found that 22% of small businesses are still keeping manual records, with 27% using basic computer programmes such as spreadsheets for their bookkeeping.
With a change on the scale of Making Tax Digital, it is vital that you make the right decision in order that you can submit your returns online as smoothly as possible.
It is never too early to start assessing your online accounting software options. Whatever software that you choose, make sure that it:
- Automatically calculates the tax you owe (including VAT and payroll tax)
- Pulls transaction data straight from your bank, your invoicing software or your POS system
- Updates transactions every day
- Creates digital records of paper receipts
At DP Accounting, we use Xero which will help ensure all of clients are fully compliant and ready for the new system.
The government have also put together a list of recommended software suppliers.
3. Have you asked your accountant for advice?
Often business owners are passionate about what their business does but their attention lapses when it comes to compliance. This is where an accountant can really help you thrive. Your accountant should be offering you advice about how to get ready for Making Tax Digital. If they haven’t mentioned it to you yet, then you should make it a priority to ask them how it may apply to you.
If you don’t have an accountant who can advise you how and when to digitise your paper-based system, then you are in the right place – we would love to help you! We have a variety of services to suit all sized businesses, but our main objective is to give you the financial support to run and grow your business.
To access our expert Making Tax Digital advice, simply get in touch with us today.
If you could benefit from an accountant that gives you more than just numbers,
then its time to get in touch!
Call DP Accounting today on 01246 451 133
We look forward to hearing from you!