IF you’re one of The Sun’s army of small business owners, you might well be aware of the government’s new Making Tax Digital (MTD) legislation.
From April 1 this year, more than a million VAT-registered businesses have had to keep digital records and will have to file tax digitally to HMRC.
The changes might seem daunting, but accounting software expert QuickBooks has been busy helping small business owners prepare.
They’ve even enlisted TV property queen and entrepreneur Sarah Beeny and accounting guru Bobby Lane to tour the country offering handy advice.
Here, Shaun Shirazian, head of product at QuickBooks, answers some of the most frequently asked questions about MTD, and explains how it might even make tax much less taxing…
So, what’s Making Tax Digital all about?
Shaun says: “In a nutshell, it means that all VAT registered businesses with a turnover above the 85k threshold have to use digital software to keep tax records rather than relying on the traditional shoebox of receipts under the bed method.
“They also have to submit VAT returns through HMRC recognised software such as QuickBooks. There are no changes to what the VAT return contains – it’s just submitting it in a different way.
“Understandably, having to learn a new way of filing might seem a hassle and one more plate to keep spinning, but in the long term, MTD will actually take the slog out of filing tax returns.
“The other good news is that QuickBooks’ research has found an average increase in business turnover of £4,400 when a company embraces digital. Being more digital makes businesses more productive by saving time that can be better – or more enjoyably – used elsewhere.”
Surely it’s just for big business owners?
“No, MTD will impact 1.2 million businesses across the UK from a sole trader working out of their van to a bigger business, like a florist with a handful of employees. VAT-registered business with a turnover above the VAT threshold of £85,000 needs to comply but it’s best to check on the HMRC website how this applies to you.”
Why has the government brought it in?
“The legislation has advantages for small business owners. Those who explore all the benefits of digital systems will discover many tools that streamline other processes at work.
“Receipt capture technology, for example, photographs your expenses on the go, so there’s no risk of losing paper receipts, and it can automatically fill in your accounts, saving you time.
“Speeding up tasks like this means businesses have more time they can to stay on the front foot when trading at home or abroad.”
What if I’m too busy to learn the system?
“Initial set-up with a system like QuickBooks often only takes a couple of hours and then there’s plenty of support and training available.
“A few small changes to a business owner’s working day can lead to huge time-saving benefits in the long run.”
What happens if you didn’t get everything set up by April 1?
“You’ll need to use compliant software as soon as possible and ensure you’re registered for MTD at least a couple of weeks before your first VAT return is due for the period starting on or after 1 April.”
“For business owners struggling to keep up, there’s an alternative solution. If you’re not ready to move over to the cloud completely, but you do keep some records digitally – in accounting spreadsheets, for example – then you can use ‘bridging software’.
“QuickBooks bridging software works with the existing data in spreadsheets to submit the details of the classic tax return nine boxes in a way that complies with the new legislation.
What should I do if I’m uncertain whether I need to comply?
“HMRC has provided detailed information on the gov.uk website, but if you need expert advice speak to an accountant. You could also visit sites such as quickbooks.co.uk, which will help you get to grips with what you need to consider and whether you have to act.”
Can you be fined for not complying?
“HMRC is taking a ‘light touch’ approach to fines and there’s a ‘soft landing’ period on record keeping for the first year – as long as business owners can demonstrate they’re making reasonable efforts to comply with MTD.
“So get the right software, register with HMRC and start moving over to digital record keeping now.”