Making tax digital will affect all business types from the self-employed to blue chips; in the way they record, submit and pay their.
The chances are you’ll have heard the phrase ‘making tax digital’ over the past couple of months. You’ll probably have heard it more than once.
However, for many, the specifics remain something of a blur and what it actually means is unclear.
Well, it’s one of the biggest changes to the tax system in recent years and essentially it’s the government’s attempt to make HMRC one of the most digitally advanced administrations in the world. It will affect all business types from the self-employed to blue chips; in the way they record, submit and pay their returns.
When will it Happen?
There will be a phased approach and bigger businesses with more resources will be expected to make the change first. By 1 April 2019 all VAT-registered businesses with a taxable turnover above the VAT threshold will be required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns. This means that there are just five months remaining for you to get your accounts in order ready for the change.
There are some exceptions to the rule, some customers may be deferred depending on their circumstances but will be expected to be up to speed by October 2019 at the latest.
Why is it Changing?
The thinking behind the move is to enable businesses of all sizes to keep a better grip on how much tax they have to pay. It’s estimated that avoidable mistakes cost the exchequer £9 billion a year.
What Software is Available?
There’s a full list of compatible software providers that can be found on the official government website. But choosing the correct software for your business is important
If you currently use very little technology or software then making the move on to a more complex piece of software may prove a step too far. For those organisations still using a spreadsheet to keep a record of sales, a spreadsheet bridging option is available. This will, as the name suggests, build a link between the company’s current configuration and the demands for keeping HMRC better informed.
For companies that are already tech-savvy, they may look to opt for software that will continue to provide them with a level of support that they have been used to, which is likely to be cloud-based software.
How to Prepare your Business for Making Tax Digital
If you already employ a practice to handle your financial affairs then they will have begun to make the necessary arrangements and will keep you up to date with any changes that you’ll be required to make. However, if you currently handle your own tax return then it’s advisable you appoint an accountant to help you over see the transition period.
It’s important to prepare in plenty of time and don’t leave everything until last minute. This well help you make better informed decisions and arrive at a solution that best fits your needs. You could make a checklist of everything you’re going to need to change and tick each task off as it’s completed.