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While Britain prepares for the looming Brexit deadline on 29th March 2019, many of us may have forgotten that the Making Tax Digital (MTD) roll out will also soon be upon us.
The Institute of Chartered Accountants in England and Wales (ICAEW) estimates that 40% of applicable businesses are still unaware that they will be affected by the upcoming changes to the UK tax system.
So, what exactly needs to be done before the 1st April 2019 deadline?
Making Tax Digital (MTD) is an HMRC initiative designed to make sure that the UK tax system is faster and more efficient for taxpayers.
Making Tax Digital (MTD) begins on 1 April 2019. From that date, VAT-registered businesses above the threshold of £85k are required to keep digital records and submit VAT returns using compatible software.
Despite calls from the House of Lords to postpone the impending deadline, the government is stubbornly pushing ahead with the initiative, in the hope they will make this tax system one of the most digitally advanced processes in the world.
Lots of SMEs see it as just another hoop they’re expected to jump through. A huge number of businesses still use Excel spreadsheets or desktop accounting software which will not be compatible with MTD. An inevitable cost will arise for adopting cloud or bridging software and the re-training of staff.
At Crowther, we’ve had lots of discussions business owners and directors about how MTD will affect their business. We understand that lots of you are thinking…
‘How on earth is this supposed to help my business?!’
But it’s happening, whether businesses like it or not; so let’s focus on the potential benefits that can come from MTD. Here’s my top 3:
- No nasty tax bill surprises
If you have instant access to your tax liability every few months, it will help to reduce the risk of being hit by any big surprise bills.
- Access to real-time information
By adopting cloud software, you can keep track of your finances anytime, anywhere, 24/7. Money is the fuel for your business. Having a constantly up-to-date picture of your numbers and the health of your business, will allow you to be more nimble and proactive in your decision making.
- It’s improving the service accountants provide
MTD has fast-tracked the use of technology used in the accounting industry. By having a better understanding of your up-to-date numbers, accountants should be providing you with a value added service that can help you achieve your goals; whether they are to rule the world, pay your mortgage or retire to your villa on the beach.
For the 40% that still don’t know, if you’re VAT-registered business with turnover above the £85,000 VAT threshold, you must file and pay VAT online.
The first thing you need to do is have a very strongly worded conversation with your accountant. It is inexcusable that they have not let you know!
Secondly, do the following:
- Refrain from using paper-based records and switch to digital MTD.
- Change spreadsheets to filing with MTD via bridging software.
- Move from spreadsheets to full MTD-enabled software.
- Work with your existing software as it becomes MTD compatible.
Send me a message and I can work with you to help you plan the best way forward.
If you are in the first wave of businesses required to move to MTD for VAT on 1st April 2019, you need to ensure that you are ready. Get in touch if you need to discuss your MTD preparations.