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Why Cloud-based accounting software is a must

If you’re a sole trader or run a business, then it’s likely you’ll have heard about Making Tax Digital (MTD).

It’s a move by the Government to make it easier for us to pay our tax and make less mistakes in the process.

With set-backs and delays in the past, the scheme will start on 1 April for VAT-registered businesses with a taxable turnover above £85,000. What do businesses need to do to get ready and will it affect other businesses in the future?

What is MTD?

The dreaded annual tax return brings many people out in a cold sweat but it could be a thing of the past for millions in the future. HMRC would like people to send in summaries of their income and expenditure at least four times a year instead.

Completed online,via a cloud-based accounting software, it can be done from your laptop, phone or tablet, whatever time of day suits you best. You’ll also be able to register for new services, update your information and see how much tax you need to pay.

Like online banking, but for tax.

What will I need to do differently?

You’ll be required to keep digital VAT business records and send returns using MTD-compatible software for VAT periods starting on or after 1 April 2019.

Businesses with a taxable turnover below the VAT threshold can also sign up for MTD for VAT voluntarily. This also applies to other VAT entities, such as charities, government bodies and limited companies.

If you’re already using cloud-based accounting software, for example Xero, then the chances are it will be fine to continue using it. It’s a good idea to check though. If your accountant files your tax, make sure they’re prepared for the changes come April.

If you’ve been thinking about moving to an accounting software like this, now is the time to make the leap. There are real business benefits to being able to see how well (or not so well) your business is performing on a monthly or even daily basis.

Who will MTD affect?

From 1 April 2019, only VAT registered businesses with a taxable turnover of over £85,000 will have to comply.

Income tax and corporation tax payments have been placed on hold until April 2020 at least.

If you usually complete a self-assessment form, the chances are that in the near future, you’ll need to comply with MTD. If your annual turnover is less than £10,000 (the current limit) however, you’ll be exempt. A small minority will also be exempt for a number of other reasons, including:

  • Disability
  • Age
  • Remoteness of location
  • Membership of a religious society or order with beliefs that are incompatible with the use of electronic communications
  • Being subject to insolvency proceedings and
  • Any other reason accepted by the MTD commissioners as valid grounds not to use an electronic return system.

 

If you’re exempt from MTD and you’d still like to take part, you can volunteer.

What can I do to prepare for MTD?

Make sure you have accounting software which can:

  • Keep records in a digital form according to the regulations
  • Preserve digital records in a digital form for up to six years
  • Create a VAT return from stored records and share with HMRC and
  • Provide HMRC with VAT data on a voluntary basis.

 

You can find more information about MTD and if the software you’re using is compatible with MTD, on the Gov.uk website.

Can my accountant help?

Here at THP we’ve been getting ready for MTD for a while now and can help you choose an accounting software package that will meet your needs. Contact us today at one of our offices in  Cheam,  ChelmsfordWanstead, and Saffron Walden.

 

Avatar for Mark Boulter
About Mark Boulter

Mark Boulter is responsible for the efficient running of the firm’s infrastructure, and ensuring that THP delivers the best client service. Promoting the vision and culture across all branches, people are the key: “I like people who have a fresh approach and I’m happy for them to run with their ideas,” he says.

Communication across departments is crucial and Mark pioneers this. He ensure that people and departments not only talk to each other, but that they share ideas– whether they’re about marketing, finance, sales, strategy or any other topic that can result in us offering a better service. “I think helping to develop the next generation of THP people is essential to our success,” Mark adds. “We’ve a lot of talented people and our way of doing things increasingly attracts ambitious newcomers who are looking for a fresh approach. That’s good for us and even better news for our clients.”

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