While it might be somewhat overshadowed by another looming deadline,
which, at the time of writing, is scheduled for just three days before, the
far-reaching consequences of the April 1st go-live for the Making
Tax Digital (MTD) initiative should not be underestimated. Although the MTD
notice does mention a 12-month ‘soft landing’ period for penalties incurred
when businesses are in breach of the regulations, there are specific caveats
associated with this and it certainly does not give businesses a free pass to
choose non-compliance. Put simply, with only a matter of weeks to go, if you’re
not ready for the MTD changes, then you really are on borrowed time.
What do we need to do?
As hopefully businesses know, by the 1st April 2019,
VAT-registered businesses will need a mechanism in place to automate the link
between their finance records and HMRC to enable them to automatically submit
their VAT returns electronically. MTD will revolutionise the UK tax system as
it will no longer enable businesses to manually submit their VAT returns, only
accepting VAT returns that are automatically submitted using compatible
software. Surprisingly, lots of the bigger software providers aren’t
proactively supporting MTD, but HMRC has helpfully produced a list of those
software suppliers who it recognises are providing MTD-compatible solutions,
making it even easier for businesses to find a solution to ensure MTD
compliance.
How do we do it?
Ultimately, in the era of MTD, technology is key, with an Application
Programming Interface (API) platform at the very heart of VAT submissions from
April 1st. Spreadsheets are still workable but it’s more of a workaround
rather than a long-term solution as records still need to be kept digitally and
spreadsheets will need to be API-enabled or have a bridging system in place to
ensure the digital, hands-free as it were, submission of VAT returns. As a
long-term process this simply isn’t sustainable, causing a greater admin burden
than in the past and therefore just not practical on an ongoing basis,
particularly when one of the overarching aims of MTD is to bring processes in
line with our digital age for increased accuracy and increased efficiency too.
Are there any other benefits?
With the right systems in place, businesses can comply with MTD while
increasing the transparency and automation of their own internal processes,
often simplifying and streamlining their accounting processes at the same time.
Providers of MTD-compatible software are able to provide advice and direction
on what information you need to keep digitally, mapping where links are needed
and confirming which solutions will meet the specific needs that your business
has. The best solutions out there are easy-to-use and easy-to-implement,
further ensuring your readiness for MTD, and ensuring user buy-in from the
outset, one of the major hurdles businesses face when any new systems or
processes are introduced.
Perhaps most importantly, the best systems will grow alongside your
business, staying both relevant and capable while your business expands or changes.
The automation and efficiency savings that can be realised by using the right
system can free up your accounting team to focus on more strategic, value-add
areas, enabling your business to focus on growth opportunities, safe in the
knowledge that you have the right systems in place to keep pace with business
expansion. The same can be said of mobile-working capabilities, with the best
systems offering mobile working as standard, recognising that often the most
dynamic businesses have mobile working at the very heart of their operations.
Digital change
MTD has been seen in some quarters as an unnecessary inconvenience and
expense, with some using this as an excuse not to get MTD-ready. In reality,
MTD is bringing about the much-needed digitisation of accountancy processes,
ensuring not only best practice but increased accuracy and transparency
too. This initiative to drastically
reduce the estimated £9 billion in revenue that HMRC sees each year is driving
reform across the sector but it’s also giving businesses that extra push to
improve their own processes. Those dependent on manual and spreadsheet-based
systems need to undoubtedly take action sooner rather than later but not just
because MTD demands it, but for the good of their own business. Those who are
yet to make the necessary changes will have to face the consequences as deemed
appropriate by HMRC, but they’re also set to lose out against their more
prepared, tech-savvy competitors who’ve already seen the business benefits to
be had from Making Tax Digital. The time to act is now.
For more information on how Pegasus can help you
get ready for Making Tax Digital, contact 0800 919704
Posted On: March 15, 2019
