If you’re burying your head in the sand about Making Tax Digital, you might want to start preparing for the upcoming changes, which are now only a matter of months away.
Making Tax Digital is the government initiative which aims to transform the tax system, helping ensure businesses get their tax right first time.
From next April, those businesses above the VAT threshold of £85,000 will have to report their VAT information digitally to HMRC, with the initiative being rolled out for other tax thresholds from April 2020 at the earliest. Those below the VAT threshold can sign up to MTD voluntarily, by informing HMRC before the start of the next VAT period. However, we’d advise those businesses that are voluntarily registered, and keeping good manual records to wait until closer to the deadline to see how things develop.
At Champion, our proactive approach to Making Tax Digital means that many of our clients are already embracing digital software such as Xero or Sage, so it’s a concern that businesses without digital support could be left behind.
As online accounting experts, we can switch you over to online accounting, assisting with all aspects of the transition. We’ll set your business up on your choice of accounting platform, talking you through the software, while allowing you to have a practise yourself. Once set up, we’ll be on hand to answer any questions you might have.
If you’re one of the many people still reliant on Excel spreadsheets or paper records, we’d recommend you switch sooner rather than later, in order to guarantee a smooth transition.
Which Software Should I Use?
Online accounting packages such as Sage 50 or Xero are both great options for managing your finances. Both systems are user friendly and affordable, and both offer bank feeds, so your bank transactions will pull through to the software automatically. Take a look at our guides below to help find the right package for you:
A Beginner’s Guide to Sage 50
Hints and Tips to Getting the Most out of Xero
Xero vs Sage 50: What’s Better for My Business?
There remains uncertainty around some cases, including those businesses which are partially exempt from VAT, making both taxable and exempt supplies. At the moment there is no API-enabled platform which allows users to process such data easily without manual input.
HMRC have said they will allow the use of spreadsheets for the partial exemption calculation, as long as there is a digital link between the pieces of software used. However, HMRC will introduce a soft landing period until 31st March 2020, where a digital link isn’t mandatory.
Bridging the Digital Gap
With the Making Tax Digital pilot now underway, there has been talk of a bridging software, enabling those businesses with complex VAT cases to transfer information to HMRC’s system directly from Excel. However, HMRC have stated that the information must not be rekeyed.
Undoubtedly, the safest way to make sure you’re prepared for the upcoming changes is to get set up with MTD-compatible software. For more information, or for help moving to an online accounting platform, speak to your local Champion office to learn how we can support your business.