Making Tax Digital (MTD) has changed the way UK businesses report their tax affairs. Instead of once a year, MTD will require businesses to report every quarter. While VAT reporting through MTD has already begun, it will be followed by corporation tax and income tax.
From April 2019, VAT-registered organizations above the £85,000 threshold (with the exception of some businesses facing anomalous circumstances) were made compulsory to record transactions digitally using MTD-compliant accounting software file their VAT every three months.
From 1 April 2020, MTD will become mandatory for VAT-registered businesses with a taxable turnover below the VAT threshold. Income and corporation tax will also go digital for all businesses.
With 1st April 2020 fast approaching, your small business should also prepare for this shift to MTD.
Change is always daunting at first. Before MTD’s compulsion, many fears were spurred about this system. Yet, upon its later implementation, businesses enjoyed several benefits.
Information HMRC can access directly through banks and other government department will no longer be required to provide. This would reduce your workload. Although, due to the quarterly system, you will file taxes more frequently, the input will be drastically lower.
Small filing errors in the start can lead to greater discrepancies in the end. It is easy to make such mistakes unconsciously, yet the implication is massive: Billions of unpaid tax are lost every year due to these taxpayer errors.
Through quarterly reporting these errors not only decrease in magnitude but are also easier to detect. The end result is a highly efficient taxation system.
By providing tax visibility in real time, MTD would ease businesses off the need to wait until the end of the year to know how much tax they will have to pay. The enhanced accessibility will allow business to make quicker and time relevant decisions.
Improved Accounting Advisement
Through accounting software badgering clients for information is easier, giving accountants more time to grow the business. Additionally, having quarterly access to tax information, as opposed to annually, will provide more information on how to business business’s profitability.
Taxation on a cloud based system will help businesses better track tax-due and repayments owed by simply by logging in through any device and looking at their current tax balance. This instant access and visibility very few months reduces the risk of being hit by surprise bills.
You should get MTD ready as soon as possible for the entire taxation landscape will be digitalized by 2020. Instead of clinging to the past, it is better to embrace the sleeker future, which will help your business scale unparalleled heights.