While there have been a few bumps in the road on the way to Making Tax Digital (MTD) its introduction is proceeding apace and it is something all businesses need to take on board.
The new system shouldn’t hold too many fears for business owners. However, all accountants have those clients who arrive at the door once a year with a carrier bag full of receipts and a sheepish look on their face. These business owners will need to adjust their approach to accounting, since MTD will compel them to file details of their tax quarterly using an online app.
This is not the same as lodging a tax return online. MTD has some important distinctions:
- Your bank transactions and other financial information will automatically feed into your digital tax account, whether or not you declare this income or these expenses.
- Your submissions must be made at least once per quarter and filed using software – an app that is integrated to your digital tax account.
Your accountant will be able to lead you through the process and there are a number of hassle free options available to you.
For our part, many of our clients, all of whom run small or medium-sized businesses, are turning to Xero – an easy-to-use, integrated accounting system that helps with invoicing, payroll and inventory, and which features a mobile app, bank reconciliation and dashboard, so you can keep track of your accounts at any time.
Online accounting software, like Xero, can also sync with other online services, like your inventory management software, or Point Of Sale software.
Many of our clients are already using this system happily and we can support you with your own migration every step of the way.
MTD will be with us by April 2018, though some small businesses will have until 2019 before they need to comply. Some however, can opt to start using the system in April 2017.
Under the new system you may have to visit your accountant more frequently, but since you will not be presenting them with a large backlog of work these visits are likely to be far simpler and quicker.
You are also unlikely to face any unpleasant surprises, such as a large tax bill that has been accumulating without your attention. Having more regular meetings with your accountant will also help them support you with strategy and tax planning that can help reinforce the important foundations of your business.