For January’s Finance pages and ahead of a year full of questions in the minds of many businesses throughout Sussex, Sheen Stickland Chartered Accountants delve deep into one of the many uncertainties: is the Government still making tax digital?
Whilst businesses and freelancers focus on the 31st January deadline for their tax return, there is a major change on the horizon and it will require some forward planning that begins now. The Making Tax Digital (MTD) initiative is a transformative policy to alter the way businesses record their finances and submit tax returns. The initial announcement was made prior to the snap election last year, and the original Finance Bill drafted from the budget laid out the requirements. That initial bill was shelved for a time while the election took place, but the government has confirmed that the MTD rules, including Making Tax Digital for VAT, will come into effect from April 2019.
Plan ahead to avoid disruption
It’s important to start planning early to avoid disruption to your business. Making Tax Digital is the name for a whole package of digital reforms and changes to the structure and processes relating to filing tax returns. The government has put a significant focus on tax avoidance, and championed the reforms promised by the MTD programme as a means of addressing this issue. The challenge for HMRC is going to be to deliver against their tax-raising objectives without imposing unfair demands on businesses. How accommodating HMRC will be remains to be seen; in the meantime, planning ahead is the most effective way to avoid any issues.
Although the title focuses on the move from paper-based to electronic records, there are other aspects contained in the planned reforms. The introduction of new quarterly returns, for example, was met with concern by business groups which stated that the regime would be a major cost and time burden for small firms. HMRC maintains that it will have a limited impact on SMEs but until the changes are implemented, it’s hard to know the effect these might have. It’s clear that keeping up-to-date records is going to assume much greater importance.
The change to digital financial records is a significant one for many businesses. The rise of subscription-based cloud accounting services has meant there is a viable option for smaller operators who don’t have the resources or inclination to invest in enterprise-level software. If you’re currently working from paper files, it might be wise to start the transition to digital records now so that you can get everything ready and iron out any problems ahead of the deadline. If you currently manage your finances electronically, it’s worth taking the time to understand what you need to record, and how, so that you avoid any delays when it is time to file your tax return.
Embracing technology brings benefits
There are advantages when it comes to managing your accounts digitally. Online accounting allows businesses to have an up-to-date picture of their finances on a regular basis and can streamline accounting processes as many tasks that businesses used to do manually are automated. This allows businesses to remain agile and alert to both challenges and opportunities in their markets and within their business. Conversely, the cost to businesses of introducing MTD, as well as the continuing costs of maintaining digital records and submitting quarterly updates are of concern. As is the availability, timeliness and functionality of the free software that has been promised.
While picking the right software provider will be one of the key decisions, accountants, bookkeepers and tax advisors are going to have a substantial role in ensuring the transition to Making Tax Digital works effectively and efficiently.
With a wide portfolio of clients ranging in size and sector, Sheen Stickland has a range of tailored services from Annual Tax Returns to bookkeeping support, allowing their clients to focus on their day job and not on laborious administration. Sheen Stickland offer a number of digital accounting solutions as a means of taking the hassle out of finances and maintaining accurate and up to date accounts for clients.
If you have any queries in respect of the matters noted above please do not hesitate to contact Sheen Stickland Chartered Accountants on email@example.com or visit www.sheen-stickland.co.uk