Three days after the UK is set to leave the EU for good, VAT-registered businesses earning above £85K will have to be Making Tax Digital compliant. This means that they will have to keep digital records of their tax and submit VAT returns via compatible software.
However, a recent survey undertaken by KPMG has revealed that two thirds (64%) of UK businesses are underprepared for this looming deadline, and they feel they need more support in order to become tax compliant. It’s crucial for SMEs to become MTD ready by 1 April 2019 as the Government has advised that from this point, businesses will no longer be able to submit VAT returns through HMRC’s Government Gateway.
While preparing to become MTD compliant may seem like an another arduous task set by the Government with many hoops to jump through, it’s important to remember that this new initiative has been put in place to help SMEs get their tax right. This is so that businesses can avoid costly fines, have a better understanding of their tax affairs and reduce their workload when it comes to sifting through receipts, finding old invoices and panicking as you fill out tax returns manually. Once businesses have got over the hurdles and transitioned to becoming MTD compliant, the old way of doing taxes will become a thing of the past. OGL is proud to announce that prof.ITplus is Making Tax Digital ready for VAT, and we’ve put together some tips to help you prepare for the MTD deadline.
When a business owner is organised and on top of their taxes, they’re taking a prevention rather than cure approach, and the same applies to preparing for the Making Tax Digital deadline. Make sure you have an MTD checklist that you can refer back to and ensure that all of your physical copies of taxes, receipts, invoices and so on are stored in one secure place, so that you can refer back to them should you need to.
Alongside this, you should work out how much time it is going to take to become compliant, and allocate resources to do so. While getting everything in place and getting organised may be time consuming now, Making Tax Digital will help your business become much more efficient, giving you time to focus on what you do best.
Embrace the digital age
Almost every single business relies on some form of software or technology to function. A survey undertaken by Business.com had shown that 43.09% of businesses used 1-3 cloud-based services to run their business, 82% of businesses use a smartphone for work and 73% of businesses use laptops to run their day-to-day affairs. As technology develops, the way businesses undertake day-to-day activities adapts, which inevitably changes processes and procedures.
If you want to make your working life easier, you need to embrace the digital age and welcome it with open arms. If you’re spending time submitting your tax returns manually via paper processes and spreadsheets, you’ll need to find an accounting software provider that’s not only compatible with MTD, but suits the needs of your business. After all, VAT registered businesses over the £85,000 threshold will no longer be able to submit their VAT return straight to HMRC.
Find out if the software you use is compliant
Before you make any drastic decisions you should get in touch with your current accounting or ERP software vendors and see if it is compliant with MTD. You might find that ensuring your software is in line with MTD is as simple as updating its features and following the same process as you did before.
Prepare to switch to compliant software
Unfortunately, some outdated accounting software will never be compatible with MTD, which means you’ll need to find a new software vendor that is not only compliant, but meets your business needs. Through a structured and integrated accounting software, you can increase your business’s profitability by optimising accounting processes and ensuring good credit control.