As we continue to move into the digital era, naturally more government initiatives are being put in place to push businesses towards making digital-first choices. Another key example of an initative designed to embrace technological changes in the introduction of Making Tax Digital (MTD).
Introducing a digital tax system means that by April 2019, all businesses with a VAT turnover of over £85,000 will be required to submit their tax records digitally. Although this change holds huge benefits for both HMRC and UK businesses, a lot of organisations will be questioning what they need to do now in order to ensure that are prepared.
We have highlighted four of the most vital things businesses should do to prepare for the upcoming tax changes:
1) Understand when you actually need to go digital
Officially, the deadline for businesses with a turnover above £85,000 is April 2019. However, what this actually means is your first tax submission after April must be submitted digitally. Depending on your organisation, tax submissions can be monthly or quarterly, so you may have a little extra time to get the right processes in place. You can find the government’s timeline here to learn more.
Having said that, what businesses should be thinking about now is what software can help you to stay on top of this so you can make sure you comply with VAT registration requirements. Regardless of the timeline, going digital is inevitable.
2) Research (keep up-to-date)
MTD is a vast change for many UK businesses (as well as the government), resulting in a large amount of required testing, IT support and due diligence. With so much happening to prepare, delays or updates may be possible so make sure you check HMRC news and developments to keep your business up-to-date.
3) Choose the right software
At present less than 15% of VAT returns are filed using software. Because of MTD, not using software will no longer be an option and businesses need to begin weighing up vendor options.
A capable online accounting solution at a minimum should be able to:
- Create digital records of paper receipts
- Automatically calculate the tax your business owes
- Update transactions every day, keeping you on top of bank reconciliation
- Pull transaction data straight from your invoicing software, point of sale (POS) system or your bank
4) Embrace change
Although change can be difficult, MTD is happening and is a great opportunity for your business to begin the journey to digitisation. MTD is being implemented to de-stress tax, remove the amount of paperwork needed in tax claims and improve the flow of information between your business and HMRC. Through tax planning, MTD even gives you the potential to lower your bill.
For more information on Making Tax Digital and how Advanced can support your business, contact 0845 160 5555.