Making Tax Digital is a government initiative that will transform the current tax system. By 2020, it is proposed that all businesses will be required to manage their tax affairs digitally through an online accounting software solution, sending accounting information to HMRC on a quarterly basis. Businesses will then be able to view all their tax data via their Digital Tax Account.
So, how will businesses benefit from being forced into the digital age by HMRC’s new regime?
We’ve highlighted some of the key benefits:
- Access a business’ tax information in real time
- All tax information and interactions will be in one place
- There will be less form filling, with a reduced need to inform HMRC of information they already hold
- Communicating with HMRC will become easier, with both the business and HMRC having a complete overview of all taxes in one place
However, it is inevitable that many businesses will see these benefits as minor compensation for what appears to be an increased reporting burden, given that financial information will now need to be submitted to HMRC on a more regular basis than is currently required.
There has been an increasing trend for several years for businesses to use cloud based book-keeping packages such as Kashflow, QuickBooks and Xero. Well over 100 business clients of Sheards already use such packages! These businesses are well positioned to deal with Making Tax Digital with minimal adjustment.
Our view is that all businesses should have up to date information on their businesses finances in order to make informed business decisions. Without reliable information how can a business hope to flourish?
Unfortunately, many business owners see their accounting function as a necessity, something that must be complied with once a year. In those instances, it is likely that the financial information is being done for compliance purposes only, and offers little actual value in running the business.
Making Tax Digital will change all that. This is an opportunity for businesses to get control of their finances, to simplify and modernise their systems and give them valuable information, at the right time. Products such as Kashflow and QuickBooks feature live bank feeds, mobile phone apps and other features that put the control back into a business’s hands.
So, whilst there are some administrative benefits to Making Tax Digital, as outlined above, it is clear that by embracing the changes businesses can gain from the changes in ways that their business will truly benefit:
- Less time spent on record keeping by using could book-keeping software that give great functionality via bank feeds, expense and mileage trackers, phone apps etc
- Management being up to date on their business performance on an ongoing basis
- Key business decisions can be made at the right time
- Businesses will be in a position to budget better for upcoming tax liabilities
Sheards have been a partner of Kashflow for several years, and have recently also partnered with QuickBooks. By including a cloud based accounting package as part of our service offering will are well placed to ensure that our clients will not only comply with Making Tax Digital, but also that they take a real benefit from it.
Our message to business owners is a simple one. There are fantastic accounting tools now available that can help you improve your business. Look at making them a part of your business as soon as possible, don’t wait for HMRC to enforce it!