Why is Making Tax Digital important?
“Businesses will have to maintain digital records and file tax information quarterly, directly from software. Research shows that there is a knowledge gap with many business owners unaware of the HMRC requirements of which come into effect for some in April 2019. Only 11% of VAT returns are filed with software, so this will have a real impact on some companies and we are ready to help”
What does it mean to have Xero MTD certification?
“This means that I have all the key information about the new legislation and our firm is ‘Making Tax Digital Ready’. I am able to help educate our staff and clients about how to meet the new obligations and most importantly, show them the benefits of keeping up-to-date digital records”
What are the challenges for businesses?
“One of the most stressful times of the year for a small business owner is when the tax submission deadline is looming. If businesses keep their records manually or in a disorganised way, as a result Making Tax Digital will be a big worry for them. Business owners will worry about the time and extra staff resources needed to convert their records to a digital system.
Businesses need to work out when they are required to go digital and more importantly not get caught out and face potential fines. Going forward tax reports have to be submitted on a quarterly basis, instead of once-yearly.”
Are there any benefits for businesses?
“We think it’s actually a great opportunity for businesses. The benefits definitely outweigh any downsides, certainly we think going digital is a no-brainer …
- Going digital gives you the opportunity to automate parts of your business, saving time and effort and allowing you to focus on other things like customers
- Having real-time accurate information enables owners and their accountants to analyse business performance and consequently plan future strategies
- Not having a yearly panic is a great boon for many business owners.
- Up-to-date systems give a better overview of business performance. We are strong advocates of “Real Time Accounting”
- Keeping digital records should reduce errors in VAT returns by having more accurate records.
- There is less likely to be under or overpayment of tax, therefore potentially less chance of a tax investigation by HMRC.
What do they need to do now?
Firstly, business owners need to do a turnover test. With effect from 1 April 2019, if your taxable turnover is above the VAT registration threshold you have to keep digital records and send VAT returns digitally to HMRC. This must be using MTD-compatible software. https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat/vat-notice-70022-making-tax-digital-for-vat .
Have a look at your current processes and convert to a digital system such as Xero. Xero can automatically calculate the tax you owe (including VAT and payroll tax). You can then pull transaction data straight from your bank, your invoicing software, or your POS system. This will let you update your transactions every day, allowing you to stay on top of bank reconciliation. One of the most time-saving benefits is creating digital records of paper receipts just by photographing them with your mobile phone.
And accounting software is tax deductible!”
“I am Making Tax Digital Xero Certified and Evans & Partners are Making Tax Digital Ready. If you have any questions about moving to cloud accounting and above all, what you need to do for MTD, then get in touch: firstname.lastname@example.org
Evans & Partners have been champions of Xero cloud accounting software since 2010. Olly Evans, Managing Partner, was quick to identify 8 years ago how digitising accounts could revolutionise running a business. In 2016 Evans & Partners became the first Xero Platinum Partner in the south-west and in 2018 employed Amar Jethwa, a business graduate from Cardiff University with a profound interest in technology to champion and lead our Making Tax Digital (MTD) service for clients.