Making Tax Digital: A step change in tax accounting is almost here7 May, 2019 6:38 am
This Solo Expenses app of the month isn’t an app; it’s the reason to turn to any one of a number of them as tax in the UK undergoes arguably its most significant change in our lifetimes.
Making Tax Digital goes live in the UK on April 1st this year. It represents a major shift in the way tax is administered and collected by Her Majesty’s Revenue and Customs officials.
The project starts with VAT, but will ultimately roll out to other kinds of tax too.
A quick trawl through the government guidance makes the new rules seem a little daunting, but that’s not necessarily the case, thanks to software developments.
Of course, Making Tax Digital is all about software. Essentially, what it means is that from April 1st you’ll have to keep all your VAT records in an unbroken digital ‘paper trail’ using software that can communicate with HMRC, and receive information back.
As far as VAT is concerned, the required information is just the same. Anyone who has ever completed a VAT form will be familiar with the boxes that have to be filled in; it’s just the way the data is added that changes, because no human intervention will be allowed after April 1st this year.
Developers are harnessing the power of the smartphone as a tool to help companies comply with the new rules. And as with all smartphone apps (such as Solo Expenses for small business expense tracking), the hard work is done in the background, making the interface as simple as possible. Getting on for 200 software suppliers have already brought product to market, and at least 70 more are in development. It’s worth checking the features available in each existing product to check that it meets your needs. Some are bridging solutions; others will keep digital records and submit VAT returns. Others will allow submitting of VAT returns and having a look at VAT liabilities, and others will keep records, submit and view returns, liabilities and payments. The best advice is to talk to your own tax advisors, and seek guidance from them. Many exist for desktop computers, but a significant number are in the form of apps, or have apps attached to them.
Entrepreneur Peter Jones is a Sage ambassador. He says: “There’s one thing that’s really important, if you think about it. Actually, preventing a problem is a lot easier than fixing a problem, especially when it comes to taxes. The last thing you want to do is have a major issue with a tax bill that’s going to take you down routes of investigation, so you just need to get organised.”
And in getting organised, he says, businesses must embrace the digital world. “It makes life easy, and it’s the only way,” he adds. And HMRC’s decision to go for Making Tax Digital means you don’t actually have a choice if you’re a VAT-registered business. The future starts here, and the sooner it’s embraced, the better.