Why Making Tax Digital is good for your business
Published 11/15/2018 by Jon Wrennall, Chief Technology Officer, Advanced
Businesses have always faced a constant stream of legislation and compliance, but when this is set against the backdrop of unprecedented disruption and change caused by technology, why should we welcome the digitisation of the tax system?
In our previous blog, we shared our top tips on preparing for Making Tax Digital (MTD), now we will look at the benefits it can bring to your organisation.
MTD is being introduced to allow the UK tax system to be as efficient, effective and easy to follow as possible. Businesses with a VAT turnover above the £85,000 threshold will be required to keep a digital record and submit their VAT returns using MTD compatible software. This change comes into effect from 1 April 2019, meaning that your first tax submission after this date must be made digitally.
Naturally, many business owners will have anxiety around the introduction of this change and wonder about the intricacies and implications associated with it. Change can be overwhelming, but we live in a day and age where it is continual, facing into the challenges and having a clear plan to navigate through them is critical for all organisations.
We have listed some benefits that can help make your transition easier:
Making Tax Digital will allow businesses to go digital
For centuries, the cliché of an antiquated business whose bookkeeping involved a shoebox full of receipts, which are passed to their accountant once a year is a farfetched exaggeration, but for many small businesses, this is a reality. Only a small percentage of SMEs actually use spreadsheets or digital software.
However, if businesses take the plunge by investing in digital technology they can realise the wider benefits such as improved security, lower IT costs, and easier mobile access. It’s important to consider these wider implications when addressing the catalyst for the change. This may seem daunting, but in order to gain the associated benefits it’s crucial to consider the broader picture, otherwise it becomes another tick box administrative change.
Moving to, and integrating, a Cloud strategy is often recognised as the first choice for digital transformation, yet some organisations are still holding back. Using a Cloud-based bookkeeping tool will not only allow businesses to comply with the new regulation it will elevate the way in which the business runs, allowing for the simplification or automation of processes, saving more time and gaining better control of its critical information.
It’s been reported that businesses making a switch of one single app to the Cloud have witnessed revenue growth of 20% which rises to 25% when organisations employ three or more online business products.
Decrease tax mistakes
It is important for businesses to make sure they get their tax right the first time, this not only avoids costly mistakes but also the wasted time spent revisiting errors. With fines running up to 20% of the tax amount it’s clear that the short term pain of having a solution for MTD will bring longer term gains in time, accuracy and efficiency which can be spent on driving the business forward.
We have already gone digital when it comes to shopping, banking and the way in which the government communicates with businesses. So why should accounting be any different? MTD will allow businesses to easily access their information from one platform, save them time and improve efficiency. We can finally throw out the shoebox of receipts and become more organised and efficient.
The scepticism towards Making Tax Digital will undoubtedly continue, but we cannot escape the inevitable. The benefits of digitisation are real and being seen by organisations who are introducing these changes. Businesses have been gradually moving away from paper accounts, and MTD is just another step that’s speeding up the transition.
It’s time to wave goodbye to VAT returns as you know them and embrace the government drive towards digital transformation. Here at Advanced we work closely with the HMRC to support this change in our product set and services, simplifying the day-to-day working of our customers.
The government recognises the move to MTD will involve change in the way businesses handle their financial reporting. In fact, just last month, HMRC announced a six-month deferral to the start date for some of the more complex businesses. Whether you’re working to an April deadline or quality for this deferral, it’s still vital to move ahead in your preparations for MTD now.
For more information on Making Tax Digital how Advanced can support your business, contact 0330 343 8000.