Business owners are already under incredible daily pressure with the day-to-day stresses of running a business, not to mention making contingency plans for the never-ending discussions around the potential impact of Brexit. As the government drives ahead with its digitisation plans, it can feel like an additional burden – rather than something designed to make life easier. The latest legislation due to come into force - Making Tax Digital (MTD -) is in danger of becoming a further strain on business owners’ time and attention – so are you prepared and ready to comply with this legislation? Recent independent research that we carried out shows only 57% of UK organisations will be prepared for MTD regulation and more than a third (35%) admit that they don’t know.
So what preparation needs to be done? MTD means that VAT registered businesses with a turnover above the VAT registration threshold of £85,000 will be required to submit returns digitally in order to comply with the new regulation. This will come into force from April 2019. Organisations who are over the threshold will need to select a software solution that is able to connect to HMRC systems via an application-programming interface (API) in order to submit digitally to HMRC.
There are various software options available to help ensure you are best prepared and ready for Making Tax Digital.
Typically, the majority of solutions are comprehensive accounting packages. However, there are options for businesses who are looking for a more lightweight solution. Spreadsheet bridging applications are good for those businesses who do not make use of a lot of technology. This type of application will be able to extract the contents of a spreadsheet and upload it directly to HMRC. The key element is that data is transferred digitally from the spreadsheet to the filing webpage without the manual keying in of data.
Granted, it may feel daunting to know where to start. To help choose the right software, and to make sure you are HMRC ready, ask yourself these 10 questions:
- 1. Have accountants designed your chosen software?
A good place to start is choosing a system that has been designed by experts. For example, accountants have extensive knowledge of financial accounting; they understand how finance teams work and what they are looking for, which means you can be confident a system designed by them will ensure you can comply with HMRC regulations for MTD.
- 2. Is the software simple and easy to use?
The software should take care of the work. You should be able to simply upload your financial data, which will automatically submit the information to HMRC. Ask for a demonstration, or indeed references from other customers who have used the solution and can provide you independent advice to ensure it is simple and easy.
- 3. Are you working with a trusted software provider?
A software provider, who has many years of experience working with finance teams and are trusted in that sector, should be your first choice. They will be able to demonstrate a track record in financial management software and demonstrate their credentials in helping customers in this area.
- 4. Are you certain that your software will help make fewer tax mistakes?
Making Tax Digital is aiming to reduce mistakes that prove costly every year and make submissions easier to manage. Your chosen solution should make your tax submission as accurate as possible by avoiding the reliance on complicated spreadsheets, reducing scope for error and reducing the reliance on key individuals.
- 5. Does your software supplier guarantee continued support?
Your software provider should continue to develop their software alongside other HMRC and customer requirements. Having the right level of support is critical in case you encounter any problems, so check the levels of support and any SLAs.
- 6. Are you confident the application you are using is developed in collaboration with HMRC?
You will need to ensure that the software provider has developed their software in collaboration with HMRC, in order for your business’ tax to comply accurately.
- 7. Is your software available no matter what, or how many finance systems you have?
The software should be used by any business - small or large. It should also integrate with the current system you have to manage your finance and accounting.
- 8. Does your software have flexibility?
The main benefit from a Cloud solution is the flexibility and scalability it provides. You are able to spread out costs monthly, handle financial management digitally and easily connect to other services and modules, this is considerably easier than buying, running and integrating a variety of different software solutions in house.
- 9. Will you have a full record of submitted returns and approval of those returns?
The software will need to keep records of income and expenses for Income Tax, or sales and purchases for VAT purposes. The software should also allow you to send updates and submit returns to HMRC throughout the year.
- 10. Will your software supplier provide an upgrade path to ensure you comply, if and when obligations develop in the future?
You need to ensure the solution you choose is future proof. Your software provider should aim to continually work with HMRC and commit to adding new functionality to their product to ensure you comply with any future changes, as the government’s digital agenda progresses.
Here at Advanced, we are a trusted UK software provider who have been in the market for over 20 years. With over 3,000 customers in the finance space alone we have ensured that compliance with new government legislation is built into our product roadmap from design inception.
If you’re looking to exploit the benefits that a cloud based MTD solution can provide then you might be interested in our new MTD online portal that in trial, customers have told us is quick and easy to use - click here to find out about more about the solution, Business Tax Portal.