IF you’re one of The Sun’s army of small business owners, you might well be aware of the government’s new Making Tax Digital (MTD) legislation.
From April 1 this year, more than a million VAT-registered businesses have had to keep digital records and will have to file tax digitally to HMRC every three months.
Spreading the word: Sarah Beeny and accounting expert Bobby Lane have travelled Britain helping small businesses get to grips with Making Tax Digital
The changes might seem daunting, but accounting software expert QuickBooks has been busy helping small business owners prepare.
They’ve even enlisted TV property queen and entrepreneur Sarah Beeny and accounting guru Bobby Lane to tour the country offering handy advice.
Here, Shaun Shirazian, head of product at QuickBooks, answers some of the most frequently asked questions about MTD, and explains how it might even make tax much less taxing…
So, what’s Making Tax Digital all about?
Shaun says: “In a nutshell, it means that owners of VAT-registered businesses have to use digital software to keep tax records rather than relying on the traditional shoebox of receipts under the bed method.
Shaun Shirazian: MTD will take the slog out of tax returns
“They also have to submit VAT returns through HMRC-approved software such as QuickBooks. There are no changes to what the VAT return contains – it’s just submitting it in a different way.
“Understandably, having to learn a new way of filing might seem a hassle and one more plate to keep spinning, but in the long term, MTD will actually take the slog out of filing tax returns.
“The other good news is that QuickBooks’ research has found an average increase in business turnover of £4,400 when a company embraces digital. Being more digital makes businesses more productive by saving time that can be better – or more enjoyably – used elsewhere.”
Surely it’s just for big business owners?
“No, MTD will impact 1.2 million businesses across the UK from a sole trader working out of their van to a bigger business, like a florist with a handful of employees. Any VAT-registered business with a turnover above the VAT threshold of £85,000 needs to comply.”
Why has the government brought it in?
“HMRC loses £9 billion a year because of human error in data entry – MTD will eradicate this by automatically tracking all activity to keep filings updated.
“The legislation has advantages for small business owners too. Those who explore all the benefits of digital systems will discover many tools that streamline other processes at work.
“Receipt capture technology, for example, photographs your expenses on the go, so there’s no risk of losing paper receipts, and it can automatically fill in your accounts, saving you time.
“Speeding up tasks like this means businesses have more time they can to stay on the front foot when trading at home or abroad.”
Digital Tax – Three Things You Need To Know
The Making Tax Digital (MTD) era is here
From April 2019, businesses with a turnover above the £85,000 VAT threshold are required to keep digital records as well as file their VAT digitally to HMRC every three months through compliant software.
They are no longer able to log on to HMRC’s online service to submit VAT returns.
Why was MTD introduced?
MTD aims to make tax admin simpler and more efficient. Ultimately, it could mean the end of the annual tax return and the frantic rush to get accounts in on time.
Instead of one big return, eligible taxpayers and SMEs will submit digital summaries at least four times a year so they will always stay on top of their accounts.
How to get up to speed
Sign up to an HMRC-compliant MTD software solution, such as QuickBooks (quickbooks.co.uk), to start filing directly to HMRC the compliant way.
What if I’m too busy to learn the system?
“Initial set-up with a system like QuickBooks often only takes a couple of hours and then there’s plenty of support and training available.
“A few small changes to a business owner’s working day can lead to huge time-saving benefits in the long run.”
What happens if you didn’t get everything set up by April 1?
“You’ll need to buy compliant software as soon as possible and ensure you’re registered for MTD at least a couple of weeks before your first VAT return is due for the period after April 1.
“For business owners struggling to keep up, there’s a temporary solution. If you’re not ready to move over to the cloud completely, but you do keep some records digitally – in accounting spreadsheets, for example – then you can use ‘bridging software’ for the time being.
“QuickBooks bridging software works with the existing data in spreadsheets to submit the details of the classic tax return nine boxes in a way that complies with the new legislation.
“But it is only a temporary solution, you will need to switch to the fully compliant return in time.”
What should I do if I’m uncertain whether I need to comply?
“HMRC has provided detailed information on the gov.uk website, but if you need expert advice speak to an accountant. You could also visit sites such as quickbooks.co.uk, which will help you get to grips with what you need to consider and whether you have to act.”
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Can you be fined for not complying?
“HMRC is taking a ‘light touch’ approach to fines and there’s a ‘soft landing’ period on record keeping for the first year – as long as business owners can demonstrate they’re making reasonable efforts to comply with MTD.
“So get the right software, register with HMRC and start moving over to digital record keeping now.”
To find out more, log on to gov.uk and search Making Tax Digital. Learn about QuickBooks HMRC-compliant accounting software at quickbooks.co.uk