Making Tax Digital - what you need to know and do

Change is happening in the world of taxation as HMRC goes digital. Making Tax Digital (MTD) is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts.

There is a lot of literature around this and a lot of hype. In short, there is nothing to worry about, if you take time to consider your options and make the right choices. It may even save you time, money and ultimately make your business more efficient.

When does MTD start and does it affect you?

From April 2019, VAT registered businesses above the compulsory VAT threshold £85,000, will be required to set up a digital tax account and file quarterly returns online using some form of software. If you are voluntarily VAT registered, MTD is optional for now.

If you currently use the gateway to file your returns, you will no longer be able to do this, you will need to have software that files your return directly. This is because HMRC will also be taking additional information into your digital tax account.

Don’t worry, for most businesses, it will make the process of filing your VAT return as easy as clicking a button, removing the need to log on to the gateway, type in numbers and get submission reports, the software will do all that for you.

What do I need to do now?

Don’t panic! You have until April 2019 to get MTD ready.

You don’t need to rush into upgrading your software, it’s a big decision and one that you will need to live with for some time and it’s important that you make a well-informed choice.

You need to find out if your current software is MTD compliant if it is then that is it, there is nothing else to do.

If it’s not, that’s fine, you just need to start to make plans about how you will either upgrade your current systems or have a look what other accounts software is out there. If it’s the first time you have had to consider moving to accounting software, again you just need to understand what is on offer.

The biggest risk associated with MTD is not being prepared or panicking, then upgrading or getting a new system before you know what is currently available which might work better for your business.

What systems are available?
The accounts software market has seen some dramatic changes over the past few years, there has been a big move to Cloud accounting packages like Xero, which don’t need to be installed on desktop or server but sit in highly secured data centres and are accessed via the internet. Other entrants like Exact Online have also entered the market in the higher end ERP systems.

The traditional market leaders like Sage have seen the dominance of their long establish products Sage 50 and Sage 200 challenged by these entrants into the market, although they are now finally making some efforts to address this.

The other big change has been the move away from paying for the software up front and have moved to a software as a service model (SAAS) where you pay for the software monthly. Even full ERP systems like Exact can now give high level functionality, like serial and batch tracing and multi-level bills of materials at a fraction of the price of the more traditional server/desktop-based systems.

Finally, we have seen the advent of the Apple model of third party add-ons for your accounting systems. Third party developers have been able to build apps that link with these cloud accounts systems, so your CRM will now talk to your accounts, you can scan purchase invoices directly into your account with no data input and your bank feeds directly into your accounts. The Xero market space has over 700 such add-ons so there is something that is useful for every business. Again, these are usually charged at a low monthly fee.

This is great news for your business, you now have a much wider choice, you do not need to invest in new IT infrastructure and you don’t need a large outlay on buying the software. Plus, using new apps and innovations you can make your business systems more connected, to give better information, more easily and quickly to help you run your business more effectively. Best of all you always have the latest version, so no need to upgrade and your data is always secure and backup.

It’s also important that you use the right partners to assist your move to new systems, you need to be able to work with them but also be confident they have both the systems and accountancy knowledge. The right partner will make your move straightforward and painless and give training and support to get you up to speed as quickly as possible with minimal disruption.

In short, MTD may seem like a pain, but there has never been a better time to digitise your business and you may find yourself this time next year paying less for your software, spending less time doing your VAT returns and with better, more powerful, information to help you run your business.

Shorts Projects Team are offering a free MTD Ready Health Check, we will look at your current systems and tell you if they are MTD compliant and if not, what options you have to ensure you are fully compliant when MTD comes into force.

If you would like a free MTD Ready Health Check, then click the link, email us at MTD@shorts.uk.com or call us on 0114 2671617 to arrange for one of our experts to arrange a Health Check.