Don’t Delay In Registering For Digital VAT Reporting
Despite the recent HMRC announcement of halts to digital tax initiatives, you should press on with what is currently available. If you run a small business, adapting MTD provisions can speed up the-accounting and financial reporting process, thus saving time for business growth.
A word of caution to landlords and businesses, the fact some MTD measures have been delayed should not be taken as a sign to rest easy.
From April 2019, the vast majority of landlords and businesses need to register for the VAT threshold. If you are voluntarily registered and your business or assets are believed to be below the £85,000 VAT threshold, now would be a good time to start checking turnover on a monthly basis.
It’s imperative to ensure you don’t exceed the threshold without realising. If you accidentally exceeded the threshold in the last 12 months, you need to opt in for digital reporting within the next month.
Once you have recorded digitally accessible accounts for the HMRC, you need to carry on this way going forward. For now, the main emphasis is on VAT. By around 2020, it will be necessary to report Income tax and Corporation tax in digital format.
The Need For MTD Compliant Software
Your software needs to be MTD compliant. Gov UK has a small list of software you can use, namely Absolute, Forbes, IRIS & Rhino.
The list will be updated as MTD progresses (given the current clamp back, this might not be for a while). It is only right and fair that the system you choose should be compatible with your business needs.
With less than a year before the VAT threshold kicks in, use this opportunity to do your research, try demos and find the best MTD complaint software for your company.
Data Specialisation And Software Training
Some specialist training may be required if you are migrating to new, unfamiliar software. Your data may require a few tweaks too.
Once again, the sooner this is done, the better. Use this window of time to review your bookkeeping. If you’re unsure of anything, our specialists at Numerion are ready to help.
Some Good News For Businesses Below The VAT Threshold
If you can confidently say you are under the threshold, there is some good news. Due to the looming task of Brexit preparation, the revenue is pooling their resources into handling changes to international trade systems.
This means you will have more time to prepare for digital VAT accounting. The first and foremost step if you have not done so already is to register for VAT.
Fully Operational MTD Expected Within A Decade
Regardless of Brexit, all accounting will eventually be digital and this means a growing need for data specialists and for businesses to learn new ways of recording and reporting data.
It is widely believed that a full transformation of the tax system is only a decade away. Everything from direct to indirect taxes will be reported through new software systems and the days of bulging file cabinets are numbered.
This is by no means a bad thing, it requires a learning curve, some changes in behaviour and will of course lead to greater transparency and hopefully, less confusion.
Automated accounting will be hugely beneficial to the growth of business for the simple reason it saves time and ultimately, money in the long term.
MTD Can And Should Eliminate The Margin Of Error In Tax Reporting
We humans by our nature are prone to err. Historically, this has meant hardship for the taxpayer. A simple mistake can lead to financial loss and tough sanctions from the revenue.
Digital tax can and should eliminate the margin of error which in turn means better relations with the revenue, better finances and no litigation costs.
This will of course take time and there will inevitably be technical issues that need to be ironed out in the early days.
Once MTD is fully functional and assuming rigorous testing and continuous improvement, there is no reason to doubt it will be a boost for UK business.
Could Blockchain Be The Future Of Tax Reporting?
Blockchain could improve tax reporting in future. Blockchain is not a panacea for all the difficulties regarding tax but it could be a valuable addition to systems already in place.
One of the key features that makes Blockchain such a viable option is it’s transparency. Because the digital ledger system in the Blockchain is not subject to fraud, accounts would be easily traceable.
Other possible advantages include real time reporting (also potentially possible with software), cost cutting (no need for expensive software) and reductions in the administrative costs of tax reporting.
Where Could Blockchain Be Applied?
The Blockchain would suit transactional taxes like VAT, stamp duties and Insurance. It could benefit company transactions through identification of profit attribution in different business sections.
As we continue to evolve in a digital age where we consume our entertainment, carry out transactions, buy and sell online, making tax digital is a necessary step in reforming the system and making it work better for the taxpayer.
As for Blockchain, it is still a relatively new technology and we don’t know for certain if it will weather the storm of change in 10 or 20 years time.
It is more likely that you will be reporting your taxes with software and maybe even an app than Blockchain. The internet took 4 to 5 decades to enter the mainstream.
For mobile apps it took about 3-4 decades so the timescale for innovation appears to be getting shorter. Filling a form online or tapping it out on a mobile is much easier than filling it by hand and sending it off in the post, that’s for sure.
Businesses shouldn’t be fearful of embracing the coming changes.
If you do have any concerns about MTD or you need any help or advice, our advisors and specialists at Numerion are here to help.