Making Tax Digital
Making Tax Digital is coming. Bulley Davey Associate Olga Carter tells us what it is – and how to get ready for it
We are living in a digital world with increasingly few areas of our lives untouched by digital technology. Accountancy is no exception and as it once moved from pen and paper to computers, it is now moving further into the digital realm.
HMRC’s ambition is to become one of the most digitally advanced tax administrators in the world. With this ambition in mind they announced Making Tax Digital, which comes into effect from April 2019 and could spell the end of annual tax returns for millions.
What it’s all about
Making Tax Digital (MTD) is the Government’s initiative to modernise the tax system, while reducing the human error that currently occurs with keeping records and submitting returns.
Next year’s introduction may seem like some way off, but it isn’t! From April 2019 all VAT registered businesses with a turnover above the VAT threshold of £85,000 will be required to use the Making Tax Digital system to meet their VAT obligations. Other businesses below that threshold can join the scheme voluntarily.
What does this mean?
Businesses required to meet the deadline will need to invest in MTD-compliant software for keeping their records and to submit their VAT returns directly from it. At Bulley Davey we’re specialised in implementing and training people with this cloud-based software – and we are partnered with Xero and QuickBooks, two examples of the kind of software that businesses will have to invest in.
This software shouldn’t break the bank – many of these systems have monthly subscription costs under £30 – and although there are some alternatives, spreadsheets, which can be used, are clunky and need to be very specifically organised and processed. If a cloud accounting software is properly implemented and you know how to get the best out of it, the benefits often far outweigh the costs, saving you time and energy that can be better invested elsewhere.
The next steps
You have less than a year to prepare, but the earlier you begin preparing, the better equipped you’ll be and the smoother the transition. The most convenient time to switch to a new accounting system is typically at the beginning of a new financial year, so ideally businesses owners should start thinking about this before the end of their current financial year, or soon after, which for many is around now!
Do your research thoroughly – there are many different providers and unique packages to suit a business’ specific needs and demands. The one everyone else is using may not be right for you. Seeking out support can also be helpful in saving you from the difficult legwork and training staff both in the transition and beyond.
As I mentioned, at Bulley Davey we have a team of advisers who specialise in Making Tax Digital and cloud accounting software who can help with this kind of support.
The future for MTD
The April 2019 deadline is just a first step in the Government’s plans to roll out MTD across multiple areas of tax. In April 2020 (at the earliest) it’s expected that MTD will become mandatory for income tax and corporation tax (as appropriate) for all businesses, including landlords, with a turnover over the VAT threshold. In the very long run, it is expected that all businesses will need to be compliant with MTD.
To find out more about Making Tax Digital or to talk to a specialist contact Olga on 01832 273150.