Why Making Tax Digital Is An Opportunity For Your Business

 

MTD is an initiative introduced by the government to digitise the UK tax system. The purpose was to help businesses by streamlining the process of meeting their tax obligations and making them easier to manage. 

 

To be able to implement MTD you need to opt for an accounting software package from a company such as Xero, Quickbooks, or Sage. It needs to be compatible with the HMRC online system, which these companies are, and this forms the digital element of MTD. 

 

Here are some important dates you should be aware of for implementing Making Tax Digital 

 

This applied to VAT registered businesses with a taxable turnover above £85,000 you must use a digital platform to keep records and submit your VAT returns to HMRC using MTD software. 

 

As a VAT registered business with a taxable turnover below £85,000 you must now use digital platforms for MTD purposes. 

 

As a self-employed business or landlord with an annual income above £10,000, you will need to follow the MTD process and rules for your income tax returns 

 

Partnerships with a turnover of over £10,000 need to adhere to MTD. 

 

It’s expected that Corporation Tax will be part of the MTD process. 

 

The practical implications of this are that you need to set up a process to enable you to record all your financial information on an accounting software package. It needs to be compatible with HMRC online services because there will be a direct link to enable you to submit your VAT and tax returns digitally. 

 

 

HMRC has been clear about the dates for introducing MTD which means you now have the opportunity to plan for the introduction within your business. A great place to start is to speak to your accountant or bookkeeper who will be able to help you with what you need to do. 

 

Many businesses are still using a paper-based system for their financial accounting or maybe don’t have a standard process for the business to capture all the financial information. If you’re in this situation then MTD is a great opportunity for you to streamline this part of your business. It will help to increase efficiencies to save you time and money in the long run. 

 

When you’re building your plan, there are 3 main areas to consider and focus your activities: 

 

 

The earlier you start to plan for MTD the easier the transition process will be. You shouldn’t leave it too close to your tax deadlines because there might be unforeseen delays in the switchover process. Unfortunately, there are penalties for non-compliance if you don’t meet your obligations so it’s a good idea to be prepared ahead of time. 

 

 

For some established businesses, the introduction of MTD has become quite an undertaking. This is because they still have a paper-based system that has probably evolved with the business but is resource-intensive. Perhaps they have incompatible software for using HMRC online, which now needs to be upgraded. 

 

The current process will have worked to a greater or lesser extent over the years. But with the introduction of MTD, it now needs to be unpicked to build a new way of working in a digital environment. The type of businesses this might apply to include agriculture, education, charities, and non-UK businesses. 

 

In many ways, a new business start-up has the biggest opportunity when it comes to Making Tax Digital. With no processes or systems set up, you will benefit from building everything around MTD from the beginning. Using a bookkeeper will make this even easier and choosing the right bookkeeper will be an important decision for you. 

 

Working with someone knowledgeable and experienced in financial accounting will mean you have one less area to worry about. They will know exactly what you need and set up the processes so they can be scaled as you grow your business. 

 

What stage are you at with your Making Tax Digital journey? 

 

Get in touch today if you have any questions or want to know more. Contact us today