Making Tax Digital for Business – opening the door to the benefits of online accounting
Online accounting has been around for a number of years, but it’s fair to say it has yet to be wholly embraced by businesses and landlords. Paper accounting and manually updating spreadsheets have become ingrained in the administration culture of many organisations. However the governments Making Tax Digital project is coming – and it will be a milestone that changes the goalposts for good.
All taxes, including income tax, corporation tax and VAT, will move over to quarterly digital reporting under the Making Tax Digital for Business (MTDfB) programme. At the heart of MTDfB is that paper records will no longer be sufficient – and it will become mandatory for all businesses and landlords to use software to keep digital accounting records. For some, the changes will not be mandatory until April 2020 at the earliest, so do you need to start thinking about it now?
The answer is unequivocally yes, and for a number of reasons, most of which will have a positive impact on the way you run your business. If your business is registered for VAT and your turnover is above the VAT threshold, there is certainly no time to lose because VAT returns will need to be filed using MTDfB-compliant software from April 2019. Indeed, pilots of MTDfB for VAT have already started, with a number of businesses trialing the new system.
Compliance is the most glaringly obvious reason to get prepared for Making Tax Digital for Business because any business owner does not want to put themselves at risk of penalties. However, compliance issues are not the only reason businesses should be moving over to online systems.
Online accounting systems such as Xero, Sage, QuickBooks and FreeAgent give a real-time view of the financial position of a business on which decisions can be taken. How can you possibly make informed business decisions without having all the key information to hand, and most crucially, in a format that is meaningful? What I have found in my two decades as an accountant is that many businesses do have this useful data to hand and are recording the information manually on spreadsheets. However, they are not necessarily using this information to get a fully-informed grasp on their business and find new avenues for growth. This is where online accounting software can have a transformational impact.
Time-saving is another big advantage of moving over to online systems. How much time – and ultimately money – could you save by using the most up-to-date technology available? The long-term benefit will be more time to concentrate on running the business and focusing on other profit-generating projects.
So what are the next steps for businesses? Our tailored solution for Making Tax Digital for Business depends largely on the stage your business is at. If you currently maintain records on paper your processes will need to change and we can help guide you through the transition process and acquire appropriate software.
If you currently use accounting software you will need to make sure it’s up to date for MTDfB or look to upgrade. If your business currently maintains records on a spreadsheet you will need to acquire software which will allow returns and updates to be made directly from the spreadsheets.
As experienced specialists in online accounting, we can support you through the changes of Making Tax Digital for Business so it is seamless, hassle-free and most importantly, works for the benefit of your business. To discuss the MTDfB scheme and making the transition, call me on 023 8046 1245 or email firstname.lastname@example.org
Andrew Kershaw is Associate Director at HWB, based in Southampton, Hampshire, and specialises in tax and online accounting.