The arrival of Making Tax Digital will have a huge impact on both businesses and their accountants. Preparation is needed by all parties to ensure that the transition to a digital service is seamless, without any errors.
What is Making Tax Digital?
Making Tax Digital is an initiative by the UK government to digitalise all tax records and returns – making it easier for taxpayers to access their personal tax accounts and file their returns on time.
MTD brings with it a huge amount of opportunities and benefits, such as the reduction of paperwork, high levels of accessibility, minimisation of errors and more. In the UK, MTD applies to any firm that meets the VAT threshold of £85,000. Businesses affected are expected to use compatible MTD software to store and submit their VAT information to HMRC.
Understanding MTD and the implications it has on your existing processes can be an exhaustive process, which is why if your company is eligible you need to prepare for MTD as soon as possible. The time is now!
MTD can present great opportunities for your business, which is why it’s necessary to prepare adequately for the initiative. Below are some of the preparations both business owners and accountants should have in place:
Preparation of MTD for Accountants
- Engage your clients
Many businesses are still unaware of what MTD entails, yet the deadlines are fast approaching. It is vital for you to create awareness around the MTD initiative amongst your clients. By engaging them you’ll not only help them understand what Maxing Tax Digital involves, but also be able to position yourself as an industry leader. It is crucial for you to be able to answer their questions confidently, such as: does MTD apply to their business? What costs will they incur with the introduction of MTD?
- Be smart
Clients will embrace the initiative much more positively if they understand the benefits that come along with MTD for VAT . As the accountant, this means that you should be well informed about the opportunities and challenges that will they encounter. Ensure that you have identified the number of clients that fall within the £85,000 VAT threshold and that you have set enough time to reach out and engage with each of your clients well in advance of the deadline.
- Be optimistic
You may face an amount of resistance whilst trying to introduce your clients to MTD and its benefits. This might be overwhelming at first but with time it will result in increased confidence, renewed relationships and higher value work from your clients. It is important to be patient with your clients as some of them may be reluctant to accept the initiative until the last minute.
Preparation of MTD for Businesses
- Keep track of deadlines
If your company has an average VAT threshold of £85,000 and above, be prepared to comply with the initiative. Provide your VAT return information to HMRC digitally in advance of the 1st April 2019 deadline. You do not want to submit your data at the last minute, in case of any challenges that can arise.
- Invest in an MTD compatible software
It is crucial for business owners to assess the accounting software that they operate on before the official launch of MTD, to find out if this is compatible with the new system. It is recommended that your business takes part in the MTD pilot tests to get a better understanding of whether your existing software is MTD compliant. Participating in the MTD pilot tests and getting this vital feedback will enable you to identify and review your choices for the compliance process. Investing in Making Tax Digital software ensures that you can smoothly transition to the new system and use the initiative’s online features with ease.