Making Tax Digital, or MTD as it’s now well known, is finally here and businesses should act soon to ensure they are fully compliant.
While there has been a lot of resistance to MTD over the years, we at Warr & Co believe it’s going to transform business finance in a hugely positive way.
What is MTD?
MTD is a Government initiative to bring all business VAT and Tax payments online securely by 2020. Digital has transformed our lives and our businesses, and the pace is accelerating every year, helping those businesses which embrace it to succeed.
Bringing business finances into the digital era seems a sensible step, and one that is probably way overdue. You see, larger businesses have operated online using cloud-based systems for many years now, and the missing piece of the puzzle was taxes. Businesses were choosing to operate more efficiently, but then had to take their digital data and still fill in HMRC’s tired VAT and Tax forms on paper or online in the HMRC portal. This opens the process up to user error and mistakes.
So the Government announced in 2017 that all businesses would soon be able to, and indeed would be required to, submit VAT and Tax reports and payments online via an approved digital bookkeeping service.
- April 2019 – businesses with a turnover higher than the VAT threshold (£85,000) must keep digital records for VAT
- April 2020* – businesses with a turnover higher than the VAT threshold (£85,000) must keep digital records and update HMRC quarterly, including payment of Tax and VAT quarterly
*note this date is subject to change, but at the moment the indications are that businesses should aim for April 2020
If MTD applies to you, you will no longer be able to use the HMRC portal to submit your VAT returns (from April 2019) or your Tax (April 2020 – tbc). So, essentially, to avoid receiving penalties, you must begin using an MTD-compliant bookkeeping software, and you must do it very soon!
For many larger businesses this has been welcome news as it cuts down on admin time. And the most popular services in the UK which larger businesses tend to already use, such as QuickBooks, Xero and Sage, made their software MTD-compliant well ahead of the deadline.
For smaller businesses this announcement has caused a few years of concern and hesitation, because many smaller businesses had no need for a digital bookkeeping service. The news has not been welcomed as warmly by smaller businesses who feel pushed into an area of business admin that they are less familiar with.
Why Is MTD Going To Be Good For Small Businesses?
MTD is going to be great for small businesses. The obvious drawback that businesses are focussing on is the added cost of an MTD-compliant software. However, the cost vs the cost of your time spent on admin will almost certainly lean in favour of MTD. Once you’re set up we expect you’ll find the time-saving will be an obvious and welcome bonus to the requirement.
In addition, who hasn’t received a penalty from HMRC for late payments or mistakes? Using digital bookkeeping software means that your business is less likely to make a mistake resulting in a penalty, saving you the cost and admin time that it takes to resolve these errors.
MTD-compliant software will also help your business run more efficiently. Expenses can be tracked in real-time, online payment gateways can be set up making it easier for customers to pay you on-time, and reporting can help you see where your business is profitable and where you might need to make improvements.
Essentially, MTD-compliant software is going to help streamline smaller businesses, helping them become more competitive against larger businesses. So all that’s left to do is to get yourself signed up!
What About Small Businesses Under The VAT Threshold?
If your business has an annual turnover of less than £85,000 then you do not need to comply… yet. Indications are that the Government will want to roll-out MTD to all businesses, or at least to more businesses. So, with the benefits listed above, we strongly recommend that you consider becoming compliant early.
What Can Warr & Co Do To Help?
Over the coming weeks we’re ramping up activity to encourage all of our clients who need to become compliant to sign up to an MTD-compliant software.
We have partnered with five of the best industry-leading digital bookkeeping services to bring exclusive discounts to our clients. There’s a solution suitable for any and all business types and structures. Discounted licences are limited and offered on a first-come first-served basis, so act quickly to make a saving. Complete the form below and request your account set-up today.
Bonus Tip: if you’re a contractor ask us about our Encompass package for contractors. It’s a complete accounting service with simple monthly payments and it includes your choice of Quickbooks, Sage or Kashflow.