Making Tax Digital is a government initiative that takes tax into the digital age.
Like us, HMRC understands that the digital revolution can benefit all of us. We have argued for some time that by leveraging the power of technology we can increase accuracy and efficiency in the way we run our businesses. Now HMRC want to use the power of digital to help companies organise their tax more efficiently.
Organisations who already have up to date ERP or digital accounting programmes are in an excellent position to take advantage of this as their providers are already working with HMRC to create the digital pipelines needed to gather the information seamlessly.
Making Tax Digital for SAP Business ByDesign users
For Business ByDesign customers you can take a look at the work that has been done on your behalf by downloading the SAP Making Tax Digital document here.
The changes will be rolled out as part of the routine 1902 update. It will move into test systems in mid February and into production systems in March. Our current customers will be supported by their account managers and help desk in the usual way. We have your backs!
If however you are still using paper accounting and you pay VAT then you may need to take action sharpish.
Read on to find out more…
Get the low down
Making tax digital requires all tax calculations to be made online, with no paper filing at all and this will happen quarterly. So, if your expenses and invoices are still based on paper or Excel spreadsheets, the time has come to make some changes.
When does it begin?
Making Tax Digital is being rolled out by HMRC starting in April 2019
Who will it effect?
To begin with it will only apply to VAT, so that means all businesses with a turnover over £85k
What will I have to do?
You will have to submit your VAT returns through the HMRC gateway using commercial accounting software. Which involves;
- Keeping records digitally
- Providing VAT returns information to HMRC through Making Tax Digital functional compatible software
Why is this happening?
HMRC loses upwards of £9bn each year on taxation errors, and they believe that’s partly due to the way businesses declare their income. Digital record keeping and automated VAT submissions should reduce error and hopefully make things easier for everyone.
What does this mean for people using paper and spreadsheets?
All data and evidence in relation to company spend – receipts, invoices and such – need to be captured digitally and submitted to HMRC using compatible software.
While the full Making Tax Digital roll-out to quarterly returns won’t happen until 2020, HMRC will require all VAT to be paid via the new system starting from April next year. This means relevant business transactions will have to be recorded digitally requiring many businesses to buy new software and train their staff in how to use it.
Cloud based software can be used to improve financial reporting both in house and to the government which will save time in the long run, more than compensating for the extra effort of reporting quarterly.
You could select a very basic finance package which will do the job just fine, or you could use this opportunity to consider your growth plans and step up to more sophisticated digital software in the cloud. We recommend SAP Business ByDesign.
When do the quarterly tax returns begin?
The quarterly tax returns won’t be required until April 2020. If you are a SME business you will have need to incorporate Making Tax Digital into your digital strategy. It is worth thinking about, as Making Tax Digital for SAP Business ByDesign users is straight forward.
Find more information about Making Tax Digital on the government website here
If you would like to know more about digitising your finance function then please get in touch – we would be delighted to talk you through your options. A good place to start is with an e-mail here [email protected] Meanwhile take a look at this high level video.