HMRC’s new ‘Making Tax Digital‘ regime comes into effect in April 2019. It will impact all businesses, but will hit VAT registered businesses currently using spreadsheets and manual records the hardest.
Whilst April 2019 will soon be here, there’s no need for these businesses to panic – yet! There’s still time to minimise the impact of the changing regulations, but time is ticking by.
What IS Making Tax Digital?
Making Tax Digital is a new regime from HMRC that requires businesses whose turnover is beyond the VAT threshold (currently £85,000) to submit quarterly updates to HMRC for VAT purposes through digital records. The process for submitting quarterly VAT returns will change, and must be completed through the software used to keep the digital records.
What do I need to do?
If you’re already keeping digital records, using Xero, Quickbooks or similar, there isn’t too much to do at this stage. Software providers are working with HMRC to ensure their software is compliant, and as existing users you’ll receive the new functionality as soon as it’s launched. You will need to make sure you familiarise yourselves with it before your first return is required but there is no immediate rush.
If you aren’t currently keeping digital records, your to-do list has one major item on it as far as Making Tax Digital is concerned, and that is to get up and running digitally in good time. The best time to move over is at your year end, and to be ready for April 2019 it makes sense to consider moving over at your 2018 year end.
Which software is best?
That’s not an easy answer! Xero and Quickbooks are both great, but have their own strengths. There are also other options for small businesses, that have their own quirks too. Personally, whilst the first two options are the strongest, we prefer to discuss the options with the business owners and bookkeepers (if appropriate) to make sure of a good fit. The other benefit of these options is that they are user-friendly and don’t require you to be an Accountant to use them! They have developed their market share by proving that any business owner who can work a smartphone can use and understand them.
The first step though is to see a good demonstration of the options and compare the different features of each package. From there you can work out which offers the best solution.
Is the software expensive?
There is a cost for the software, regardless of which one you go for, BUT these are far lower than the historical model where you used to pay hundreds of pounds every year to get the latest updates. These days it’s a monthly charge of between £15 to £25 which generally includes:
- Regular updates
- Automatic back-ups
- Online support and lots of tutorials for new users
- A range of features that can bring big benefits
Are there any other benefits to digital records?
Absolutely! Though HMRC is pushing business owners to make the move, and there will be a ‘pain barrier’ for those who are being forced to move from spreadsheets and cash books, there are BIG benefits:
- You can get a clear view of your finances at any time, wherever you may be, and from a range of devices.
- The software can automatically import your transactions from your bank, in real time.
- Send invoices straight from your system and avoid double keying and the associated errors.
- You can use your mobile phone upload invoices and receipts to the system.
- The reporting functionality can show you key information about your business at the click of a mouse, making you far more aware of its performance.
- Give your Accountant or Bookkeeper access and they can login remotely to work on your system or see how you are progressing.
- The time saved just in making sure your manual records add up properly will easily justify the monthly spend for the software once you’re familiar with it.
- When it comes to year-end, there’s no need to bundle up all of your paper files for your Accountant; they can obtain the majority of what they need, just be logging in to your system, using the standard access already set up for them.
How can we help?
This will vary depending on where your business is at the moment, but could include the following:
- We are specialists in and Cloud Accounting and have helped dozens of clients over the years with selecting and implementing the best solution for them and their goals. As Xero Certified Advisors and Quickbooks Online Certified Pro Advisors, we understand the nuts and bolts of each system.
- We can take you through a demo of the different software options and explain why each feature may be of benefit to your business. This is far more useful that watching a video online without any narrative!
- We can equate your existing process to the new system, showing you how you’ll benefit from the changes.
- We can help you set up a timeline for moving from manual records to digital, tailored to your business, your year end and your busy periods. This will make the process as painless as possible!
- We’ll make sure that you know when Making Tax Digital will hit you – regardless of whether you’re already keeping digital records, are an exempt business or are under the current VAT threshold.
- We can help with the new process when it comes to your first filing deadline under MTD and for any future concerns or issues.
So, what next?
If you’d like know more about how Making Tax Digital might affect you, what you can do to minimise the upheaval it may cause when it comes in or about digital record keeping, please get in touch; we’d love to put your mind at rest and help you to see the benefits rather than just the pain!