Making Tax Digital – Don’t be fooled
Meet Frank. He’s the owner of a printing shop in the Midlands. He studied basic accountancy and so he’s always done his own accounts.
Over the years, he’s developed a series of Excel spreadsheets that do everything he needs them to do. Profit and loss figures, the balance sheet, VAT calculations and more are all capably handled.
Frank is like many small and medium sized business owners in that he uses Excel spreadsheets for his accounts.
The trouble is, all that is all changing.
On 1 April 2019, Making Tax Digital for VAT came into effect. Now VAT-registered businesses with a taxable turnover above the VAT threshold need to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns.
The benefits of Making Tax Digital are hard to dispute. As the Government points out, you may already bank, pay bills and interact with your customers online. Moving tax online too will eliminate paper-based processes so you have more time to spend on running your business efficiently and effectively.
But keeping records digitally and using software to submit your VAT returns is nevertheless a big change for your business if you’re like Frank and use Excel spreadsheets and other paper-based processes at the moment.
Are you affected by Making Tax Digital for VAT?
The 1 April 2019 deadline applies if you are a VAT-registered business with a taxable turnover above the VAT threshold. This includes you if your business has a turnover above £85,000 and you use the Flat Rate VAT Scheme.
The only exception to these cases is a small minority of VAT-registered businesses with more complex requirements. If this is you, you won’t need to comply until 1 October 2019.
More information is available on the gov.uk website. Take a moment now to check if you are affected.
Take action now
The government has compiled a list of compatible software. It makes sense to do your research thoroughly, choose the software that’s right for your business, plan the implementation and get it right first time.
If you want to continue using your spreadsheets, you can, but you need to use bridging software that takes the information from your spreadsheets and puts it into a digital format that can be submitted to HMRC. There is more information at gov.uk.
Consider the bigger picture
If you’re used to doing your accounts in-house using Excel spreadsheets, you’re probably thinking the same as our printing shop owner Frank is. Why should we have to invest in software to do work that we’re doing for free at the moment?
It’s worth remembering that digitising your systems saves time and money.
Take travel, expense and invoice software for example. Research found that small to medium sized businesses using integrated expense, travel, and invoice solutions save 500 hours per finance employee and an average of £47,000 per year.
Andrew Simcock is Finance Director of Atech, a recent SAP Concur customer. He says: “We found that the cost savings we’ve been able to generate from using Concur have already paid for the system, so we’ve effectively had a time saving with net zero cost so far, which is absolutely brilliant.”
Imagine the difference moving to a completely digitised system could make to your business.