Making Tax Digital – the deadline is looming but there are many benefits in “going Digital”
The way we all file our VAT and Tax returns is about to change and the date for the change is fast approaching! Just in case you aren't aware, the main points that will affect you are:
- From April 1st 2019, all VAT returns have to be submitted online via third party software such as Xero and Sage - and not via the HMRC portal.
- From April 1st 2020, HMRC have indicated that all corporation and income tax returns will also have to be submitted using third party software.
Whilst many businesses will already have software solutions running in the cloud, some won't and it is important to start the process of implementing this change now and not to wait until deadlines are upon us.
As part of the digital transformation we are also recommending that make use of an app to capture your primary records such as receipts. Apps such as Receipt Bank allow you to take a photo of the receipt and this photo is then automatically transferred to your accounting system and will also be stored for the statutory seven years, meaning you don't have to keep any paper copies.
Another example of time-saving is that there will be less filling in of forms. In the current format you are often asked to complete forms and provide information that Her Majesty's Revenue & Customs (HMRC) already holds.
The good news is that once you are set up on a system that is fully compliant, the time saving can be considerable. You will also have access to real time management information – usually via an easy-to-read dashboard - allowing you to make informed decisions quicker and enabling accountants, such as ourselves, to provide better advice.
Another efficiency benefit is that fewer calculation mistakes are likely to be made compared with using a non-digital process. Most businesses want to get tax right, but it can be complicated and mistakes can prove costly. HMRC indicates that avoidable tax mistakes cost the Chancellor of the Exchequer more than £8 billion a year, with £3.5 billion of revenue lost because of VAT-return mistakes alone. Making Tax Digital aims to dramatically reduce this amount—for businesses and the economy as a whole.
As a Platinum Partner for Xero we have been working on the most efficient way to implement the new requirements and can advise you on the steps needed for your business. Xero is a friendly system and is Making Tax Digital compliant.
Our message to business owners is simple and clear. There are excellent accounting tools now available that can help you improve your business. Don't wait until the deadline to be fully compliant! If you need to make changes look at making them a part of your business as soon as possible, don't wait for HMRC to enforce it! We invite you to call your advisor now to understand the steps you need to take.