02 Feb 1. Making Tax Digital
“Every once in a while, a new technology, an old problem, and a big idea turn into an innovation.” – Dean Kamen (Inventor of the Segway)
Gillingham Chamber of Commerce and Industry have been listening to the rumblings from members. In particular, accountants within our membership who have been busy filing tax returns are now turning the thoughts to informing clients of the new tax system about to affect all businesses.
It has taken its time to get here but on 1 April it will arrive with a flourish and probably many a headache. However, it has been pared down from the original all-encompassing explosion of regulatory conforms we thought would come in. Making Tax Digital has been talked about even longer than the Brexit negotiations.
From this April it will affect any business with a turnover of over £85,000 which also puts you into the VAT threshold. Included in the list will be sole traders, partnerships, landlords and trusts or charities.
With the technological revolution, we find most companies use digital banking, pay bills and receive money through the internet. Although cheques are almost a thing of the past, banks have automated machines to pay in cash and cheques. Many business and personal accounts now allow you to upload cheques through your mobile phone. We carry our wallets and travel documents in our phones so it was inevitable that taxation would come into line with VAT accounting at some point.
In reality, if you are already using software that computes your VAT, the chances are you will notice very little change to your day to day practices. However, if you still rely on a spreadsheet and a shoebox full of receipts dropped ceremoniously on your accountant’s desk, you are in for a monumental change in procedure.
Accountants will still be able to delve through your box of goodies and transcribe them to a compatible program before uploading via the cloud to HRMCs system. This will not prove very cost-effective in the long term. It is not the fault of the accountants, the extra workload involved has to be charged, so it makes sense for businesses to invest in their own accounting systems.
You will have to invest in a compatible accounting software programme to log your income and expenses. There has been a big hike in advertising by the differing software companies; introducing MTD on the TV, Radio and in printed media in recent weeks. This has followed years of them developing and rolling out with a softly softly approach to future MTD plans. Suddenly the future is here and very much a reality with the first phase coming into effect this April. Are we ready?
The software available mostly requires a monthly or annual subscription fee, will need to be cloud-based and recognisable to the system used by HMRC. There are many versions now available and many more in development. Your accountant can advise you on the best system for your company.
This will roll out to all businesses at some point in the not too distant future, April 2020 is the proposed date and no matter what the outcome of Brexit, this will happen. For many small companies and particularly sole traders, this is going to be a big shift in your daily routines. Not to mention an additional expense on your profit and loss account.
As chamber members, we can inform you of changes within industry, but the changes will affect each company in a different manner. If you have any questions about Making Tax Digital please call one of our accounting members to advise you on your individual needs:
HMRC offer quite a lot of advice on this subject here although this is huge, you can source the information and a whole lot more on their site.
Although for some it might seem a big change and more expense, the long-term view is that businesses will be more streamlined and cashflow confident with immediacy to tax liabilities and financial stability. Shoeboxes full of receipts will be a thing of the past, invoicing and credit control will be automated, and photographing your receipts on your phone as it happens will become everyday practice.
Come and meet (Bev?) along with other members at the next Happy Hour on Thursday 7 February at the Wine Bar in Queen Street. Clifford T Shean are kindly sponsoring the event and would love the opportunity to buy you a drink and chat about what they and our chamber members can offer your business.
If you would like to sponsor one of our Happy Hour evenings, please email email@example.com.