There’s a digital storm coming, but you probably already know about it. Or some of the details, at least. Making Tax Digital (MTD) is set to be the biggest shake-up in British tax procedure for a generation. Soon you’ll be submitting tax returns quarterly, and exclusively online. This could be as early as April next year if you’re over the VAT threshold, which is currently £85,000 per annum. If you’ve not already gone digital with your finances, you need to get a move on.
But that doesn’t mean the human element of accounting is going away. The way in which we submit data is going to change, but accountants are here to stay. A lot of that is down to VAT’s role in future practices. Read on…
The Digital Revolution and the Risks
If you’re earning over the VAT threshold by next April, you will be forced to use digital means to declare what you’ve collected. While this only applies to VAT, at first, MTD is quickly going to be rolled out across the board.
By April 2020, every VAT-registered business will have to declare Income and Capital Gains Tax online too. Users will have a digital tax account, a quarterly submission schedule, making accurate accounting and bookkeeping even more critical.
However, there’s a risk at play. Plenty of software has been built in advance of MTD, claiming to be the only thing you need to be on the safe side of the system. But some people – quite rightly – aren’t comfortable with these tools. And even those that are face the risk of non-compliance if they aren’t fully clued up about finance.
Falling back on tech to do the job for us is not good enough. Laws may be overlooked for what can and can’t be claimed. For example, I might take a client out to dinner. The receipt carries a 20% VAT surcharge. Yet client ‘entertainment’ is not a permissible expense, under the government’s rules. A piece of software such as QuickBooks or Sage may analyse that receipt and classify it as expenditure, leading to a false claim in the report.
What’s more, the process is automatic – someone can easily forget to double-check their data, assuming it’s correct. Validity can’t be left to chance.
An Irreplaceable Service
This is where accountants come in: they know VAT legislation inside and out.
They can assess your accounts and ensure you’ve not only complied with regulations, but claimed everything you’re entitled to.
Although MTD is coming, services like ours aren’t going to be nullified. Accountants must instead change with the times and support clients in making the move to digital, especially with easy-to-learn software such as Xero in their back pocket.
With the right accountant by your side, going digital will help, not hinder, your business. Whether you’re already over the threshold, considering voluntary VAT registration, or you simply need help with cloud accounting, I can help navigate the complexities of MTD.