Don’t worry you are not alone, current estimates are that up to 60% of small businesses are not ready. This means that most companies are not in the position to comply with upcoming deadline.
What is Making Tax Digital (MTD)?
It is a key Government initiative with the aim of making it easier for companies and individuals to monitor their affairs and ensure that pay the correct tax.
From April 2019 any VAT registered company earning over the £85,000 threshold must keep digital records and submit their returns via an MTD compatible software package. It is anticipated that MTD will be rolled out for Corporation and Income tax next year, at the earliest.
What does this mean to my business?
This means that paper records will no longer be sufficient, you will need to maintain your records using a software package (or at the very least on spreadsheets). If you are not currently using an MTD compatible accounting software package you will need to obtain one prior to submitting your next VAT return, or employ an accountant to submit it for you.
Whilst initially this appears to be further layer of burden on businesses, it is an opportunity to take stock of your current record keeping procedures. In today’s ever digital world is it really efficient to be maintaining crucial information in a solely paper format? If you are still doing this ask yourself how are you checking the accuracy of the records, how are you backing them up, how do you search for particular items? If you are still using paper you will be spending more time creating the input each month and then reviewing them each quarter or year end.
Time spent now getting your data into a digital format will reduce time going forward. You will be able to check and amend your data in a more timely manner. This will then give rise to more accurate recording of your tax affairs therefore, reducing the chance of errors, miscalculation or fraud.
Once you have embraced MTD and chosen the software that works for you, you will find that the whole process of filing your returns is much easier and quicker. No more will you be checking figures input against lines on a ledger to ensure the figures match up. This will reduce the chance of an honest error that could mean that you pay too little (or too much) tax.
HMRC accept that most business aim to get their tax right, but even so the public purse loses over £9 billion each year as a result of avoidable mistakes. If MTD can reduce this figure this will have a massive benefit to economy going forward.
It is expected that, whilst the deadline is April 2019 to ensure compliance, HMRC will provide advice and assistance and give a “soft landing” in the initial period but those businesses who continue to show non-compliance will ultimately face sanction, including fines.
So if you are one of the many not yet ready to comply, don’t worry you are not alone but it is not too late. Don’t bury you head in the sand hoping MTD will go away, it will not. Embrace the opportunity to improve your business and save you precious time. Visit the Making Tax Digital website for a list of compliant software, speak to your accountants and get yourself ready for the new digital tax landscape.