One of our clients received a phone call last week on behalf of HMRC to find out what she knew about Making Tax Digital. She then phoned us in a panic!
And she isn’t the only one who doesn’t know a lot about Making Tax Digital. Over 40% of VAT registered businesses are still unaware that in less than a month’s time they need to switch to digital tax accounts.
If you’re one of the 40%, this blog is for you – a quick overview of Making Tax Digital, benefits to your business and what you need to do next.
So, what is Making Tax Digital?
Making Tax Digital (MTD) is about making it easier for individuals and businesses to get their tax right and keep on top of their affairs by using a fully digitalised tax system. Gone are spreadsheets, hardcopy invoices, and last minute ‘doing your books’. Instead, everything will be done online, in one place.
And although you will need to submit more regular updates (quarterly, instead of yearly), the system will ultimately make life easier for you, as you won’t need to provide HMRC with information it already has or is able to get from elsewhere – e.g. from banks, building societies or employers.
What are the key benefits of Making Tax Digital?
Getting to grips with MTD can be stressful initially, but in the long-term you will see the benefits including:
- Access to real-time information: once up and running, all your transactions will be recorded on a real-time basis. This means you will have immediate access to up-to-date financial information, allowing you to manage your profitability and cash flow much more effectively.
- Save time, avoid errors: MTD is all about making managing and submitting business taxes easier and more accurate, and because the system will link to your bank and accounting systems, you won’t have to input data multiple times.
- View your tax records wherever and whenever you want: as all your tax records will be online and in one place, you will be able to access them from any device to check your entitlements, liabilities, taxes paid and taxes due.
So, what do you need to do next?
- Confirm your start date. If you’re a VAT-registered business, you should have already received a letter from HMRC confirming if you fall into the April or October rollout. Some businesses with more ‘complex requirements’ have been given an extra 6 months to prepare. Check this list to see if it applies to your business and if you haven’t received a letter yet, contact HMRC to confirm your start date.
- Review your software and accounting systems and ensure they comply with the requirements to use bridging software to submit VAT returns. Use this tool to find out if your software is compatible.
- Think about what data you will have to share with HMRC and review the quality of that data – is it up-to-date, in the right format?
How can we help?
If you don’t think your business is ready for MTD yet, then give us a call.
We’ll be happy to help assess your readiness for MTD, identify any areas where you need better digital links and recommend the right software packages for your business.
And don’t forget, MTD will be rolled out to those of you who are self-employed and pay corporation tax. That won’t be until April 2020, at the earliest, but it never hurts to get ahead of the game.