Making Tax Digital - burden or opportunity?
Back in 2015 the government starting looking at what was being lost across all taxes by errors, mistakes, omissions and delays and arrived at a figure of over £9billion lost annually. This led them to start planning fundamental changes to the tax system, effectively pushing the onus on to third party software to highlight and adjust for errors and omissions.
Following representations, the government have changed to making VAT registered businesses the first part of their plan as this is the tax most widely using digital means to produce returns currently. Please remember though that this sector only accounts for around 10% of the tax which they perceive as losing and it would take a very large stretch of the imagination to conclude that they will forget about the other 90%, so this is only the first step!
What does it mean for businesses?
On the 13th July 2018 the government eventually produced notice 700/22 setting out the rules for making tax digital for VAT applying from 1st April 2019.
VAT registered businesses with a turnover above the current VAT registration threshold (currently £85,000) will have to:
Keep their records digitally (for VAT purposes only)
Provide their VAT return information to HMRC through Making Tax Digital compatible software
Although many businesses already use software to do their records keeping and produce VAT returns, only 12% of VAT returns are currently submitted directly from software. For some the change will be relatively easy but, for those businesses still using cash books, excel spreadsheets or just manually adding up the entries on bank statements, this will bring major changes to how you keep and maintain your books and records. If you are one of these businesses our advice is to start looking at software now. HMRC refer to bridging software so that the use of spreadsheets, meeting certain criteria, can continue. We have not been able to find any at this stage.
My accountant says wait until April!
Although this may be a forced change it may also be an opportunity to consider what would benefit your business. Software will help you to stay on top of record keeping, allowing you to understand better how your business is performing.
Key benefits include:
Simplifying Book Keeping
Knowing where you stand
When it comes to who owes you money.
As soon as possible
Knowing potential tax and VAT liabilities
With an accountant or book keeper
Work online collaboratively
Plan and budget more effectively
Reduced accountancy fees
Please also remember that the more you do online the less chance there is of information being lost, following computer failure, fire, flood or theft.
Are you working for your accountant or are they working for you?
We are aware of many accountants charging huge amounts for conversion of software and training. We are also aware of accountants ignoring these changes as they do not believe they will happen. Make no mistake, it is happening and the onus is on you to make sure you are compliant, not your accountant!
We have worked hard in providing solutions to our clients across a range of software. We started this process for our clients over a year ago to ensure that each client was setup and supported in the way that suited them and their business best. While it is true that a few clients don't like the change, the majority are saying that they wish they had done it sooner.
Those accountants leaving things until April will only be able to provide an out of the box solution and will simply refer you to software support for any issues. Now that we have reviewed our own clients and are offering this opportunity to other businesses.
We have partnered with QuickBooks
Our main focus has been a partnership with QuickBooks to provide a cost effective solution. We are Certified Platinum Pro Advisors and able to deal with data conversion,training and support. Please contact us for advice on how you can make these changes work for you and your business.
Interested in QuickBooks?
Get in touch with us today to see how you and your business can benefit from using QuickBooks.