The day after Brexit - it's about Making Tax Digital
THE wheels of Making Tax Digital (MTD) are starting to gather pace and heading for the deadline of April 1 2019.
Of course not all businesses will have to comply by this date. But companies with a turnover of more than £85,000 will have to digitally submit their tax records to HMRC. They will no longer be able to do this via HMRC's Government Gateway.
Making Tax Digital is a government scheme that will change the way businesses pays its taxes to HMRC. The government had set a plan in place to transform the tax system by 2020 by introducing digital record keeping, while also bringing in quarterly updating for landlords, the self-employed and businesses, covering self-assessment, corporation tax and VAT.
The government decided to put in place a phased approach to its Making Tax Digital project that would last over the three tax years from 2018-19 to 2020-21. This was then put back a year and as a result, it will commence next April, with VAT being the first area to be addressed. That 'live' date is only six months away, and the first working day after Brexit! So if you meet the above criteria, and many companies do, you need to be starting to plan now.
All the main software vendors like SAP, Sage, Iris Exchequer etc have been meeting HMRC on a regular basis since the government released plans for MTD, and are releasing their relevant updates. However, there is a finite time involved here, and if you haven't spoken to your financial software partner, to put it bluntly, it's really time you had.
Not that long ago, before the wi-fi technology had settled down and the cloud was the new buzz word, many accountants and business owners were sceptical regarding anything digital. Today businesses not only see the benefits of digitisation, they are looking to push the boundaries of it even further.
Millions of businesses are already banking, paying bills and interacting with their customers or suppliers online. Many larger multinationals are putting software in place, known as Enterprise Resource Planning (ERP) solutions, and will expect their sub-contractors and suppliers, to implement little brother versions of the same software, so as to fully integrate with each other as efficiently and cost effective as possible. HMRC is really only going down this same type of road and will expect companies and organisations to fully integrate with them.
HMRC has set a target to become the most digitally advanced tax administrations in the world and MTD is making fundamental changes so as to make this a very real possibility.
HMRC would acknowledge that the vast majority of companies and organisations do their best, and are keen to get their tax right, but recent feedback suggests that too many find this just too difficult. It's estimated that these mistakes cost the British Exchequer in the region of a colossal £9 billion a year.
It's thought that the research from, and conversations with, key software vendors, have resulted in developing functionality in software solutions that will improve accuracy, avoid conversion errors and will reduce the amount of tax lost to errors.
Of course, no matter what size of business you have, and that also includes small businesses, you can benefit greatly from using software to keep digital records. Software not only helps businesses run more effectively and efficiently, it helps reduce errors that are as a result of manual calculations and are totally avoidable. Developing little 'nudges' and pop-up helps, look likely to be developed as time goes on, to further eliminate reporting errors.
As a result of inputting records digitally, reports are available in real time and receipts and invoices are less likely to go missing or recorded incorrectly at a later date.
Many people can think of the scenario, where an engineer returning to the office after a week on the road with a raft of receipts, at best rolled up in a heap, making critical figures illegible to office staff who have the task of inputting data.
Making Tax Digital is much more than just keeping records digitally and reporting to HMRC electronically from those records. It will change the way we engage with the government. MTD is the technological embryo to start this new way of business life!
:: Trevor Bingham (email@example.com) is business relationship manager at ItFuel in Craigavon. Follow them on Twitter @itfuel.