Designed primarily to address the £9bn lost by HMRC each year due to tax errors, the newly established Making Tax Digital (MTD) initiative went live earlier this year - its April deadline for compliance already a distant memory for many businesses. However, while most have complied, there are some still to act. Some are perhaps taking advantage of the 12-month soft-landing period for businesses found to be in breach of the regulations, or perhaps still at a loss on how best to comply at all. With a new 2020 deadline now in place for those businesses operating under the VAT threshold, the pressure really is on now to make the necessary changes not just to ensure compliance, but also with a view to achieving valuable business efficiencies that moving to a culture of digital accounting can bring.
Put simply, the whole concept behind Making Tax Digital is to move to digital record keeping, putting mechanisms in place to automate the link between finance records and HMRC to enable the automatic submission of VAT returns electronically. This is with the goal of eliminating errors and getting it right first time more often than not. It’s revolutionising the VAT system in the UK, meaning that it will no longer be possible to submit VAT returns manually, with HMRC only accepting VAT returns that are submitted in the right way, using compatible software.
What this has meant for all VAT-registered businesses in the UK is that they’ve had to find the best approach to achieve this. While some have opted for spreadsheet-based workarounds, these just aren’t practical or sustainable in the long term. This is particularly true when you consider that at the heart of MTD is an attempt to increase accuracy and efficiency for both HMRC and UK businesses. While HMRC has now given businesses until 31st March 2020 to ensure there are the necessary digital links between software suites, those businesses who have yet to act need to really put the wheels in motion now. This is not only to ensure compliance, but to cash in on the business benefits that more forward-thinking competitors have achieved since going digital with their accounting.
Digitising your accounting processes and procedures has the potential to revolutionise your business. MTD requirements act as the push in the right direction that many businesses need to bring their finance function in line with the digital economy in which we’re all operating. This goes a long way to explaining why some businesses have signed-up to comply with MTD before they legally have to, keen to benefit from the efficiencies that such changes can bring. In essence they’re streamlining existing processes and procedures to make a real difference on the bottom line.
With increased digitisation comes increased automation. This not only helps to greatly reduce the inevitable errors that are part and parcel of manual or semi-digital, disjointed processes, but makes for real efficiency savings as well. This enables the finance team to focus on more value-adding areas of the business, pursuing any growth opportunities that might arise and adding real strategic value to operations rather than being tied down by mundane, albeit vital processes that can now be carried out automatically.
Transparency of the entire accountancy function is increased greatly too. Gone are the days of disparate spreadsheets and databases containing information from various business departments. The software is able to pull together data from right across the business into a single, centralised location. Not only does this mean that there’s only ever one version of the truth but it gives the business a clear, consistent business-wide view of the organisation, guaranteeing better, more accurate planning, budgeting and forecasting.
The intelligent application of technology can make everything more accessible, with easy-to-use and easy-to-implement solutions simplifying processes and ensuring user buy-in from the outset. This means getting things off to a flying start from day one and, perhaps most importantly, having the right system to grow alongside your business. Far too many businesses have their growth potential stifled by ageing, legacy systems which, apart from not being fit-for-purpose, simply don’t have the agility, flexibility and scalability needed to fully exploit any growth opportunities that may arise.
Implementing the right digital systems and practices ensures compliance with MTD requirements but also brings a whole host of other benefits. For those businesses who are serious about competing in our new global, digital economy, now is the time to act. Digitising processes and procedures by way of flexible and scalable solutions with an eye firmly on long-term success is your key. We’re half-way through 2019 already and with the 2020 MTD deadline now looming, large businesses would be wise to act sooner rather than later or else risk being left behind by their more forward-thinking, digital competitors.
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