Is your business ready for HMRC’s revamp to the tax system? If you’re a VAT registered UK business, you would have already experienced the first submission of VAT returns online in April 2019 with the next one due in a matter of days, on 7 October. Albeit the first one was fraught with technical hitches on HMRC’s side, Making Tax Digital (MTD) is here to stay. HMRC advise £9bn of tax revenue is lost each year due to incorrect submissions and the move to digital tax will go someway to reduce this tax loss and effectively capture all UK business activity in one place. Is your small business ready for Making Tax Digital?
Making Tax Digital advice from a fellow business owner
HMRC rolled out the first phase of MTD in April this year, focusing on VAT businesses with a turnover of £85,0000 or over. With a surprising 12% of businesses still filing VAT returns manually, it’s clear the transition to digital tax requires careful planning by businesses who do not digitally keep records but a smart move which could benefit businesses, with cost saving predicted to up to £17,000 per year.
Cost savings and business efficiency are the main drivers to wholeheartedly adopt digital tax via cloud accounting platforms, such as QuickBooks and Xero. We offer access to cloud accounting software to all our clients, not matter their size or industry, call us today to see how we can help you.
10 tips to get your business ready for Making Tax Digital
To help make sure you are ready for the upcoming changes to the tax system, here are the 5 top tips and essential advice to get your business ready for Making Tax Digital.
1. Start now
If you’re a smaller business, MTD could be just what you need to kick start your digital accounting procedures if you are not already using cloud accounting software. This is a great opportunity to increase productivity within your accounting process.
2. Are you VAT registered?
If your business is VAT-registered, with a turnover above the VAT threshold (currently £85,000) you will already have experienced the first phase of MTD, requiring you to submit your VAT return online, with paper copies no longer accepted by HMRC.
If your business is not VAT-registered but is approaching the VAT threshold, it will be worth your time to begin understanding the MTD for VAT requirements and potentially seeking the advice of an accountant to help prepare, with VAT returns, an already complex and time consuming task to complete on your own. Southside Accounting can help with your VAT returns, call us to see how we can help you comply with MTD rules.
If your business is new or in the early stages of growth, you might find yourself affected by MTD for VAT in the very near future and you should try to project your income for the remaining accounting period to see if you qualify. Again, you possibly would want to seek advice from an experienced accountant, like Southside Accounting, to help you project turnover and cash flow for your small business.
MTD is more than about filing your VAT return digitally. You are also required to store some of your VAT information digitally and if you use more than one piece of software to store your VAT information to complete your VAT return they must be “digitally linked.” You might need to start preparing for these requirements well in advance as changing systems within your business could be time consuming and costly.
3. Talk to the experts
If you haven’t started to prepare for digital taxation, talk to the experts in that field for the correct advice.
This can be your accountant if you have one, a tax expert or a business adviser who can help you move in the right direction.
You can call us for a free no obligation discussion on your MTD requirements.
4. You will need ‘MTD’ compliant software
Accounting software providers will be on track to make platforms MTD compatible for accountants to service their clients, initially allowing them to submit VAT updates directly to HMRC, on an quarterly or annual basis.
Accounting packages, such as QuickBooks and Xero, are geared to support the transition to MTD and enables you to track cash flow, raise invoices and schedule payment reminders, all of which can help operational efficiency, whilst importantly operating in accordance to HMRC standards.
5. Review your Making Tax Digital plan
If your business is already using accounting software, you will need to check with the software provider that the it has been updated to the latest Making Tax Digital-enabled version.
If it will be in the future as MTD evolves and more phases are rolled out by HMRC over the next two to three years, check to see when your accounting software will be updated.
It’s also worth working out when will be the best and most practical time for your business to make the software switch if you need to. For example, you might decide to do it after your year-end.
If you’re working manually, using spreadsheets for example, consider what steps your business is going to take so you comply with Making Tax Digital.
And if you’re using an accountant, it’s worth checking your Making Tax Digital plan with them. They might be able to offer some useful insights and advice.
You can contact us if you are looking to bring operational efficiency in your business and go digital, ahead of the full roll out of MTD.
Get ready for Making Tax Digital: Final thoughts
If your business makes a start now with the changes to Making Tax Digital you are much more likely to be able to fulfil your new obligations smoothly by the time you are affected by MTD as a small business.
Make sure you provide yourself with the time to adapt to the changes; if you need support it’s worth sourcing it now rather than rushing later down the line.
Spending the time now to prepare for MTD will benefit your business in the long-term. You will have the opportunity to save time and effort spent on record keeping which may otherwise have been a manual process, using spreadsheets for example. You can, if not already, start to automate accounting processes and have the added comfort knowing that your records are accurate.
It is reported that £30.8bn is spent on unnecessary admin by businesses every year. By adopting MTD software and business processes now, will save you time and money in the long-run and most importantly allow for little disruption to your clients.
So speak to the right people, put your MTD plan together and take the steps to get ready for Making Tax Digital.
Southside Accounting can help
If you are a small business owner looking for support to grow and stabilise your costs and increase cash flow, Southside Accounting can help, providing accounting services and sole trader services in Wimbledon.
Southside Accounting are your local cloud accountants in Wimbledon and London. We’re local, like you. And we’re a dynamic small business. Just like you.
We are fully chartered, certified accountants so we’re well qualified to be the trusted advisers you need to help make your company a success.
All our clients are on the cloud and have access and support on cloud accounting software, in both QuickBooks and Xero.
Our fixed fee structure means there are no surprises. And our smart Service Plans are tailored to meet the particular demands of your business.
Call us to book a free no-obligation meeting today.
We always offer an initial free face to face meeting with prospective clients, so we can get to know you and your business and understand your unique circumstances and business goals.
Written by Shaima Todd.