Tax is going paperless, is your business ready?
With everything from parking meters to doctors appointments now available online, it was only a matter of time before the world of accounting and bookkeeping caught up. That's right - Tax is going paperless.
In adherence to new 'Making Tax Digital' guidelines, HMRC are asking that all VAT-registered businesses churning out an annual turnover of more than £85,000 transition to a new digital format when filing and submitting tax returns. As of April 1st 2019, businesses across the UK must begin inputting all financial data into MTD-compatible accounting software and make the switch from paper records to digital ones.
Whilst some organisations - such as charities and those that fall under the umbrella of 'public sector', amongst others - may be granted a little more time before these rules apply (until October 2019), for the rest of us, it's time to invest in some serious software.
Accounting software can make light work of many of the painstaking processes required to complete tax documentation - from payroll and invoicing to detailed, fuss-free reporting. For it's ease of use and error-free accounts, many companies have already transitioned to software-based accounts management, but as of April 2019 it is no longer a luxury - it's a requirement.
Holding digital records not only enables businesses to store data in the cloud and therefore access it from both computer systems and mobile devices, it also significantly curves the window for error, meaning hundreds of thousands of businesses all over the UK are saving money, energy and time.
The most highly-awaited features of MTD software, though, is the ability to monitor your tax situation and payments due, in real-time. Currently, in order to establish just what kind of damage your HMRC tax bill will cause, you can only really work with vague estimations until the end of the year when your annual tax return is filed. The real-time feature of all MTD software allows businesses to get a more realistic bearing of tax expenses, and then can make preparations accordingly. That means no unexpectedly large tax bills and no last minute payment panic.
Compatible MTD interfaces will require a minimum of four financial inputs over the course of the year and you will be able to access a wealth of computer-generated reports. You'll now be able to calculate your tax obligations throughout the year, helping you create a watertight budget and get the most accurate annual projections possible. That means that both you and HMRC will be able to keep an eye on how your numbers are shaping up at any given stage.
We're aware that such a drastic change to the way you and your business interact with accounts can be daunting, so we've compiled all of the 'need-to-know' information in one, thorough infographic. Without further adieu, here is 'Absolutely Everything you Need to Know about Making Tax Digital' to help you familiarise yourself with the basics...
With this new system kicking in so soon, it's only sensible to make sure that both you and your company have taken appropriate measures, familiarised yourself with the relevant protocols and are ready to roll as of April the first.
It's important to realise that making the switch to digital won't just make you HMRC-compliant, either - it will also help you offload a whole host of financial responsibilities, too. By handing over the reigns to automation, certain software will take care employee payroll, provide thoroughly broken down financial reports - some will even manage company stock and inventory. If you're really lucky, you might even get yourself some software that does all of this, and more. It all really boils down to the demands of your particular business and/or industry.
We're aware that there are a lot of options. We're also aware that the quest to choose the right software can be difficult given that new government guidelines have seen a huge boom in financial tools. We recommend truly exploring how each piece of software will integrate with your current system, and find the one which is most compatible with your company's current accounting habits. For example, if you are a brand that requires robust reporting functions and needs to be able to demonstrate this with visuals, you may opt for a piece of software such as FreeAgent - a colourful piece of software which can present data in an array of digestible graphics and charts.
You may find that your business needs to opt for something that has great mobile accessibility. If you find yourself often needing to access or input your financial data whilst out of office, you might decide to consider Quickbooks for it's particularly user-friendly app or Xero for its ability to scan and extract data from receipts. It truly is down to you.
Once you have got a firm idea of everything you need your software to do, finding one that fits the spec will be easy. We suggest taking the bull by the horns and calling up a few companies that have made your shortlist to enquire just what they can do to help boost your brand that their competitors cannot. Often, you'll find that they ask you just what sort of functions you are looking to automate - that way they'll know whether or not they're APIs can handle your business demands.
Alternatively, if you're still struggling to decide, why not seek out the advice of technology companies and websites that you trust. As MTD has truly rocked the accounting world to its core, there are many comparative pieces currently floating around the internet which look at one software directly against another. Do some research and find a piece that covers your two or three frontrunning software options and use that as a basis to form your decision.
If, even after all of that, you're still a little bit apprehensive about the 'Making Tax Digital' switch, you can find more information on the HMRC website. Whatever you do, though - make sure you do it quickly- April 1st is fast approaching!