Why Making Tax Digital is good for your business
Businesses have always faced a continuous stream of legislation and compliance changes. But when this is set against the backdrop of unprecedented circumstances and disruptions, why should we welcome the digitisation of the tax system?
Making Tax Digital (MTD) is being introduced to allow the UK tax system to be as efficient, effective, and as easy to follow as possible. Businesses with a VAT turnover above the £85,000 threshold are already required to keep a digital record and submit their VAT returns using MTD compatible software. For businesses below this threshold, the deadline for making the switch to digital is April 2022.
Naturally, many business owners will be uncertain about the introduction of this initiative, and will be wondering about the intricacies and implications associated with it. Change can be overwhelming, but we live in a day and age where it is constant. Businesses must be adaptable in the face of these hurdles, and should have a clear plan for navigating through any alterations.
Making Tax Digital is a change that we believe should be embraced with no trepidations, as it will actually bring about numerous benefits for your company, such as the following examples:
There are many SMEs that still carry out accounting and tax-related activities via more traditional methods, such as pen and paper, or perhaps spreadsheets. And these approaches may work for some, if it’s a system they’ve used for a long time, or due to the scale of their processes.
However, if businesses take the plunge, by investing in digital technology they can inherit a multitude of benefits, such as improved security, greater cost effectiveness, and remote access.
It’s important to consider these wider implications when weighing up these changes. It may seem like a daunting prospect, but to gain the associated advantages, it’s crucial to consider the whole picture, and the kind of returns such a tool would bring to your company.
Adopting a cloud strategy is often recognised as the first step in digital transformation, yet some organisations are still holding back. Using cloud-based accounting software not only allows businesses to comply with the new regulation, but it will elevate the way in which their processes run too.
It facilitates automation to a large extent, allowing you to save time, and to gain greater insights from your valuable data. This automation and knowledge facilitates growth (for those businesses that want to expand), and just generally increases productivity and revenue through enhanced activities.
Decreases human error
It is important for businesses to make sure they get their tax right the first time, this not only avoids costly mistakes, but also the wasted time spent revisiting errors.
With fines being a real risk for those that submit tax late / incorrectly, it’s clear that the short-term pain of investing in technology is worth it, and will be repaid in the long-run. Plus, more time will be spent driving the business forward, rather than firefighting.
Many have already gone digital when it comes to shopping, banking and other personal activities. So why should accounting be any different? MTD will allow businesses to easily access their information from one platform. With all employees having a clear view of the bigger picture, and no time being spent sifting through old receipts and paper records.
Some will continue to be sceptical of Making Tax Digital, but it is an agenda that is inevitable and mandatory. The benefits of digitisation are real, and are already being felt by those that have embraced it early. MTD has simply speeded up the large-scale transition.
VAT returns as we know them will become a thing of the past, as the government encourage digital transformation. The move to MTD will involve change in the way businesses handle their financial reporting, which can be complex for some. This is why the government have deferred the date for some companies, in exceptional circumstances.
But whichever deadline is applicable to you, you should press ahead with implementing the changes as soon as possible. Not only to be compliant, and to stay ahead of the curve, but to gain the benefits mentioned above too.
Here at Advanced we work closely with HMRC to support this change in our product and service range, simplifying the day-to-day working of our customers. For more information, take a look at our dedicated Making Tax Digital page, and get in touch to see how our solutions can help you with the transition.