How Business Owners Are Preparing For Making Tax Digital

by Adam on September 28, 2017

digitalThe government’s Making Tax Digital initiative plans to completely reform the way that individuals and organisations do their taxes.

With the change, HMRC aims to become ‘one of the most digitally advanced tax administrations in the world’. However, this also means that many businesses will also need to make the change to digital tax to comply with HMRC’s new system.

Whether you’re a small start-up or a large multinational corporation, there are steps that you should take to ensure your organisation is prepared for the switchover deadline in 2019.

To help, chartered accounting firm Alexander and Co, have spoken to business owners to see how the change has impacted them, as well as offering their top tips to help you prepare for Making Tax Digital.

lightbulb momentFranck Energy

Marcus Franck is the founder of London-based company, Franck Energy. They specialise in helping UK homeowners and businesses switch to renewable energy technologies in their property. Here’s what Marcus had to say about the scheme.

“The Making Tax Digital scheme is certainly a worthwhile endeavour, and one that we’re happy to support. Visibility on tax commitments should be as real-time as possible, and to digitise the whole process will help businesses manage compliance. The UK tax system has been in need of an overhaul for some time, but we appreciate the complexities associated with modernising an established system of processes.

The major challenge will on the customer service side. Not only will businesses and individuals need to get used to the systems, but there will inevitably be bugs and errors. This is always the case in a project so significant, no matter how much care is taken in the implementation. I think patience is a virtue in this instance, and everybody should work together to ensure more efficient taxation infrastructure for the future.”

calculating costsWelch and Ellis Accountants

Welch & Ellis accountants offering accountancy, bookkeeping and taxation advice to business and personal clients. Partner, Rob Ellis, had this to say about the Making Tax Digital scheme.

“Nearly 90% of my clients still operate their bookkeeping on a non cloud bookkeeping system. It was fortunate that HM Revenue and Customs, through consultation, postponed it until, at the earliest, 2019.

I can see lots of problems with those who have subcontractors and CIS and tying the CIS monthly return system up with Making tax digital.

In addition an unexpected withdrawal of overlap profit relief could mean most sole traders and partnerships changing their accounting year ends to the 31 March which will create a real bottleneck for the accountancy profession and HM Revenue and Customs.

Add to this another penalty system for late filing and we could have businesses rack up penalties if they miss the quarterly filing regime will replace the once a year tax return.”

three-fingersThings you should do to prepare for Making Tax Digital…

Here are 3 simple steps you should take to better prepare yourself for the change to digital tax:

1. Get to know the deadlines

Different organisations will adhere to different deadlines depending on whether the organisations turnover is over the VAT threshold.

It’s important to find out these deadlines so that you’re not left playing catch-up at the last minute. To learn more about Making Tax Digital, visit the government’s website dedicated to the scheme.

2. Look for accounting software

If you’re ready to make the change to digital tax, you should start looking for accounting software as soon as possible. There are several things to look out for when searching for the right accounting software. But ultimately, you should find a piece of software that is HMRC  compliant.

3. Speak to your accountant

The chances are that your accountant is already using a piece of accounting software that they know inside and out. However, you will need to liaise with your accountant to make sure the system they use is HMRC compliant, and is also compatible with any digital tax software you are considering.

It’s important to utilise all the information out there to make sure you know exactly how to prepare for the change to digital tax.

If you’re kickstarting the switchover or even if you’re operating digitally already, let me know in the comments what you think about the Making Tax Digital initiative and how you’re preparing for it.

Previous post:

Next post: