With just five months to go, Steven Wright at Sapphire Systems urges businesses who have yet to comply to act now
While Friday 29th March 2019 is set to be a historic date in next year’s calendar as we stand to officially part company with the European Union, hot on its heels, just a few days later in fact, is another major deadline set to impact almost every business across the country.
If you’re with me so far and know what I’m referring to then you probably don’t need to look at this blog. If not, then read on…
1st April 2019 sees the launch of Making Tax Digital (MTD), an initiative set to revolutionise the UK’s tax system through digitalising the process of paying tax and in doing so, improving the efficiency of the way in which revenue is collected.
The new rules are borne out of a need to drastically reduce lost revenue, which at the last count equated to around £9 billion annually as a direct result of taxpayer errors according to HMRC. With that amount of money at stake, it’s difficult to argue with the logic behind the scheme, and many believe that reform of the way in which tax is paid is long overdue.
But not everyone has embraced the new framework positively. While businesses with an annual turnover of less than £10,000 are exempt, the changes will impact around 3.3 million businesses. And with a large proportion of this figure made up of small businesses, the scheme has attracted controversy and criticism, with officials putting the cost of the technology necessary to comply at around £330 million.
HMRC believes that small businesses will more than recoup any investment in the technology required to fulfil new obligations with estimated administrative savings of £80 million, making it a win-win for those affected. And for those unable or unwilling to invest in new systems, spreadsheets are still workable for the time being. However in reality this is a workaround for the short term as VAT Returns must be created using data from the spreadsheet and submitted electronically. While this might sound like an attractive option for those late to the table and cautious about investing in new systems, it actually represents a greater administrative burden and therefore is unlikely to be sustainable longer term.
Whatever approach you decide to take, one thing is clear - the shift to digital is not going to reverse. Resisting change and doing as you have always done simply isn’t going to cut the mustard as your competitors invest in new technology to help embrace new opportunities to boost productivity, or create new business models.
Digitalisation of accounting processes really does represent best practice, accuracy and transparency, and while MTD might be forcing the issue a little sooner than some might be comfortable with, it is driving much needed reform and supporting a fairer, more accurate way of both revenue collection and management of payments.
Follow our five-step guide to being ready when 1st April 2019 rolls around:
1. Be clear on the deadline. April 2019 is the deadline for businesses which have a turnover above the VAT threshold (£85,000), while the majority of other businesses will have a little longer to prepare. Those with an annual turnover of less than £10,000 are exempt.
2. Consider your options. Selecting the right accounting system or ERP software is crucial – consider whether Cloud or on premise software will best meet your requirements and look for ease of use and intuitiveness, as well as mobile availability. Look at whether multi-currency is sufficient or whether you need fully international accounting functionality.
3. Act fast. With a matter of months to go, there is a degree of urgency now, and any upgrade or deployment must be undertaken imminently to avoid potential complications.
4. Ensure everyone is on board. Automating and digitalising financials represents a new way of working which will deliver a plethora of benefits. But in order to realise these fully, buy-in from the executive team and users is crucial.
5. Select a system which will scale and grow with your business. Whilst MTD is prompting a shift to automation, it is important to look at the full extent of benefits to your business and work with a system which will support you long into the future.
Making Tax Digital is here to stay and it’s vital that you’re on board. With the deadline fast approaching make sure that you’re at the ready with fully compliant software technology. Already a customer or looking for a solution that suits your business management needs? Find out more by visiting our MTD with Infor SunSystems or MTD with SAP Business One guides.
One of our team will be in touch shortly.