Making Tax Digital
Making Tax Digital – why now is the time to implement changes
Many key events in recent times have brought sharply into focus the need for businesses of all sizes and sectors to plan effectively for change.
General Data Protection Regulation (GDPR) and the UK’s departure from the European Union – and all the legislative changes that entails – are just two examples of where businesses have had to adapt and evolve.
Maxing Tax Digital (MTD) is no exception. From April 2022, all VAT-registered businesses are required to keep digital records and align themselves with HMRC’s MTD process.
If your business’s planning in this regard isn’t yet underway, now is the time to start to ensure the transition is both as smooth as possible, as well as guarding against any issues and/or unnecessary delays further down the line.
What is Making Tax Digital?
Ultimately, MTD has been devised to make it easier for businesses to submit tax returns (gone are the old-fashioned physical spreadsheets kept in a folder) as well as ensuring returns are accurate.
As the name suggests, MTD is the migration from manual records and converting to a digital version which can then be submitted with ease online to HMRC.
This can be done in a number of ways but must fall within HMRC’s guidelines for submission.
What are the key considerations for businesses?
Whilst digitising tax returns will likely save time and effort in the long run and provide a more streamlined, easy-to-process approach to submitting tax returns, initial challenges may present themselves.
Such challenges may include the initial process of converting manual data digitally; identifying and obtaining software that will do the job you require in line with the standards set by HMRC; upgrading or adapting existing software where applicable; factoring in the time and costs to the business of adopting a new process; and training staff to use new software and adapt to changes in working.
What are the timescales?
The first tranche of changes meant that businesses with a taxable turnover above £85,000 were required to keep digital records, however as of April 2022, this has now been extended to all VAT-registered businesses – applying from the first VAT return period from 1 April.
Self-employed businesses will need to follow suit from 6 April 2024 and whilst this grace period will be welcomed for those who fall within this category, the time to start planning is now.
Should I consider external support?
Whilst the penalties are different depending on turnover, businesses can be fined up to £400 for not complying with MTD. Even if tax returns are submitted on time and are accurate, fines can still be levied against businesses if these returns are not MTD-compliant.
It’s also worth noting, as previously mentioned, that a change to MTD will ultimately be beneficial in the long run, so it pays to become compliant at the earliest opportunity, especially given it is mandatory.
The best plan of action can vary dependent on an individual business’s circumstances and getting the process wrong can also result in unnecessary and disruptive delays and costs, so getting support and expert advice may well be both the most cost-effective and time-effective course of action, especially if a business does not have a dedicated finance and/or IT department.
At Wills & Trusts, our dedicated, experienced and friendly Accountancy team offer a truly bespoke, personalised approach – getting to know both you and your business to offer the best, tailored advice and support.
Get in touch today to discuss how we can assist in making your Making Tax Digital both smooth and effective, allowing you the time to get on with running your operations.