Within the Spring 2015 budget, the government made their plans clear for the introduction of a completely modernised and streamlined tax system, spelling the end of the tax return as we know it. With a £1.3bn investment, the government announced it would revolutionise the service they provide to taxpayers, making Britain one of the most digitally advanced tax administrations in the world.
With simpler and more aligned payments for tax, Making Tax Digital set out a bold new vision which aimed to be fully operational by 2020. The message is still clear for all businesses – digital tax is the future – take your accounting online and ditch the spreadsheets. At Alexander & Co, we are at the forefront of helping businesses make the digital transition. Our Tax experts are here to tell you why Making Tax Digital can’t be ignored.
What you can’t ignore Making Tax Digital
By the year 2020, most business (including partnerships, companies and individuals who are letting out properties and self-employed) will need to update HMRC on a quarterly basis and keep track of their tax affairs digitally.
In theory, by reporting their information closer to real time, businesses should find it easier to understand how much tax they owe, helping to eliminate any uncertainty or figures, meaning they can budget accordingly and keep a close eye on their cash flow.
How will Making Tax Digital simplify tax?
You will know your position
No longer will businesses need to wait until the year is over before discovering how much tax they owe. HMRC will collect and process information in as close to real-time they can. This should help to stop a build up of tax repayments owed and make budgeting much more manageable.
Everything under one roof
By 2020, taxpayers can observe their entire financial picture in their digital account, similar to the way you would with an online bank account. Furthermore, taxpayers will be able to set an overpayment of one tax against another, just like paying a single tax.
For small businesses, there is plenty of accounting software to choose from, such as Xero and KashFlow, which make switching over seamless. Getting started with this software now will give you a chance to become familiar with MTD, whilst staying compliant with HMRC.
What if you don’t keep accounting records?
One of the main problems with MTD is that many businesses do not maintain any digital accounting records. Now, they are suddenly being asked to do so. For those businesses who do not choose to move to a commercially available software package, HMRC has indicated free software and products will be provided.
Using accountants for Making Tax Digital
Using software packages, businesses may choose to set up and maintain their digital accounting records themselves. Although, it’s always advisable to use the assistance of an accountant. Now, more than ever, it’s vital accountants are educating their clients on how to manage their cash flow and bookkeeping effectively in preparation for the changes.
The modern accountant can truly add value to companies all over the UK, shaking off the perception of glorified bookkeepers and becoming integral, high-level business advisers. For any questions regarding whatsoever, make sure you get in touch with Alexander & Co today.