Making Tax Digital – Be ready…
Did you know that just as businesses are getting over the huge cost and upheaval from the Automatic Enrolment regime HM Revenue and Customs (HMRC) are introducing ‘Making Tax Digital’ (MTD)?
Whilst the final details are yet to be finalised, the 2017 Spring Budget saw the announcement that in essence from April 2018 sole traders and landlords with an annual turnover above the VAT threshold (currently £85,000) will be required to submit summary business data to HMRC each quarter. From April 2019, those with a turnover over £10,000 will also be required to meet these new filing obligations.
Although there may be a few limited exemptions, businesses will have to use digital tools, such as Xero for their accounting systems to enable them to meet these new obligations and HMRC have confirmed they will not be providing their own bookkeeping/accounting software which means that you will have to choose your own cloud accounting solution.
So what does this mean for SME’s
Very simply it means that very soon businesses will probably need to move all financial accounting system onto a cloud accounting system, such as Xero. If you’re not sure what a cloud accounting system is think of it as the difference between traditional banking and online banking.
When online banking first came in there was resistance and worry over security. Now most people use online banking. It makes our lives easier. We can transfer money far quicker than writing out cheques and posting them. We can check our bank balance whenever we need to. We can move money between accounts instantly.
A cloud accounting system has many advantages over more traditional accounting systems (manual books and records, spreadsheets and desktop systems) with information and data becoming more real-time and accessible for anywhere in the world, making the transition to MTD more seamless.
We know that these changes coming in from April 2018 (which isn’t too far away) are just the beginning in HMRC’s step towards complete digitisation and the end of the tax return as we know it. Businesses soon need to start getting ready to embrace these changes so they do not get in the way of what is important – your business.
If you wish to discuss ‘Making Tax Digital’ in more detail, please do not hesitate to contact us.