As part of HMRC’s continuing digitisation program it is introducing Making Tax Digital(MTD) from April 2019. This means all businesses with a turnover over the current VAT threshold of £85,000 will be mandated to maintain their VAT records digitally and submit VAT returns through MTD compatible software or a combination of spreadsheets and software.
Due to the pressures of Brexit, MTD rollouts for Income and Corporation Tax have been delayed beyond April 2020.
The frequency of returns will not change nor will the payment dates, but by April 2019 the software used must be MTD compatible and by April 2020 the software must be capable of exchanging data digitally with HMRC. Filing via the existing HMRC portal will no longer be permissible.
The introduction of MTD provides businesses with an opportunity to review their systems, software and processes to make the processing of supplier invoices and payments easier. This will potentially speed up the collection of debts and provide vital information to assist in the management of the business.
Many of us are already using digital processes to pay bills, interact with customers and banking, but imagine being able to produce up to date management information within a couple of days of a month end. This could be a game changer for your business. The use of up to date information can help you plan your next steps as a business, safe in the knowledge that the decisions you make are based on current and accurate data. Linking the data to financial forecasting software can provide you with the data to immediately see what the impact of the decisions you make could have. With budgets set, you now have the tools to monitor your progress and benchmark your business.
Knowing who owes you money in real time can potentially improve cash flow and enable your business to be much more reactive to debt collection. Digital systems can be set up to automatically send out email reminders, chasing debt for you and you can even set up the email to have a link to your card payment provider so that the customer can pay you at the click of a link, with the money automatically being allocated against the invoice. Sounds too good to be true? In fact, all of this is already possible!
Your next steps should be to ensure that your systems and your accountant are working towards MTD by next April.
Firstly, take a look at our publication on Making Tax Digital which gives more details of the proposals then ask whether your software will be compliant and how it can be used to ease the process whilst improving the information you need to run your business.
If you need further help in ensuring your business is ready for MTD get in touch with us using our Contact link.