MTD (Making Tax Delightful !!) – Painless or Problem?
I’m on a mission to make life and business easier - when it comes to tax, accounts, #GDPR, #CRM and any time-consuming process in your business, I want to help make it easy for you. I’m also on a mission to make complicated topics less daunting and want to talk to you if you need clarity on any subject I cover.
Anybody filing a tax return in the UK should be aware by now that tax returns are changing. Over the next 2 years, everybody with an income of £10,000 and above from their business will need to be filing tax returns every 3 months and in a lot more detail, including transactions. #HMRC are introducing compliance in stages, with the final move to digital #tax returns being 2020.
This is likely to have several implications for small business owners and the self-employed, both good and bad.
Do you know all the details?
One of the major differences aside from the regularity of filing is the amount of information needed to be submitted. Transactions will need to be tracked in a complaint process, and irregularities between bank statements and final reporting will be a lot easier to spot. Accountants I have spoken to are in 2 camps about the matter, some rubbing their hands in glee with all the extra time they should be able to charge for while making sense of client’s record keeping, and some concerned about the sheer volume of work this process may bring upon them especially if records kept by their clients are a little less than perfect.
What can you do to make sure your returns are as accurate and as transparent as possible?
Firstly, it is a necessity rather than a luxury to be using some sort of online tax reporting software. Packages such as #Xero, #Quickbooks and #Kashflow are working on being compliant with #MTD, which will make the return quick and simple. HMRC are not releasing software to complement their new system, so do your research to find the right platform for yourself.
Now for the important part that I believe many businesses are likely to fall into a bit of confusion over - making sure ALL of your business software works together with this accounting package so that orders, invoices, expenditure and stock levels can all be easily followed, tracked and reported on AND are reflected accurately in the #VAT owed to HMRC. Something that surprises me time and again is that very few business management platforms fully integrate with accounting programmes - the more different pieces of software you are using, the harder it becomes to make sure everything really does balance out - something that YOU will be held accountable for and have to provide the reporting for.
What follows is a scenario from HMRC- This is a fictional case study to illustrate the impact of Making Tax Digital.
Making Tax Digital for small companies
Dave and his wife are directors of a small supply and fit plumbing company. It’s busiest during the winter months and steady throughout the rest of the year. They have recently registered the company for VAT. Dave and his wife are the only employees.
What does tax feel like for Dave now?
- Dave keeps the company’s business records on a spreadsheet
- He has an accountant prepare the Corporation Tax (CT) return
- Income fluctuates over the year and he worries about cash flow
- He also worries about his tax obligations and keeping on top of different reporting/ payment cycles for different taxes
- Whilst other areas of the company are easily managed ‘on the go’, tax management is not
- Dave feels disconnected from the company’s tax position and misses out on useful support because he’s not aware of it
How will Making Tax Digital help Dave?
- Dave chooses a third party record keeping App to help him stay up-to-date throughout the year
- The App supplies Dave’s accountant with the company’s records throughout the year
- It also prompts Dave in real time to check potential errors
- Updating HMRC quarterly gives Dave more up-to-date information on the company’s cash flow and greater certainty about the company’s tax bill
- He also links his company bank account to the App so that income and expenditure automatically populate the company’s quarterly update
- All of Dave’s tax information is together in a single place. All he needs to do is review it and update the company’s digital tax account with HMRC
- Dave has also authorised his accountant to view his digital tax account
- Through the App, HMRC can also signpost Dave to relevant help and support such as webinars
- The support feels tailored to the company and helps Dave to make the right decisions for the company
Lastly, make sure your accountant is really on board with helping you to make sure all of your systems are helping your journey through MTD be as easy as possible, the role of accountants is expanding into an advisory role, and if yours isn’t helping you with really good advice on the systems you can put in place, it’s time to question how they will be able to gather the information to accurately file your accounts for you.
For a bit more of a perspective on how your current ecosystem might be hindering you see some selected articles below:
If you want to know more about the likely implications for yourself and your business or receive some (mostly unbiased) advice about software and integration, I’m always happy to talk, at #Unified Apps, we only give a sales pitch if we know we will help a business save money and increase efficiency.
Imtiaz specialises in helping SMEs around their automation challenges. If you'd like to talk, feel free to reach out via email firstname.lastname@example.org or phone +44 162 856 3357
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