For many business owners, the present tax system is simply not very good. The modern government systems used by HMRC are outdated and therefore need to be replaced. Their new and improved replacement, Making Tax Digital, is a step in the right direction. However, like any other kind of taxation system, there will be a bedding in period that might be rocky in the extreme.
If you want to make sure that you can “get” Making Tax Digital, consider the following implications that might come up.
Get ready for leaving paper behind
For many people, the concept of no longer having paper records will be quite the headache. However, it’s going to become part of modern-day business parlance in the United Kingdom. If you want to start making the right kind of calls about your taxes, then you should start preparing now in earnest.
Start making digital records of all of your accounting records. It might mean a bit more work as you keep both paper and digital records, but it’s better to be fully prepared now rather than caught out when the time comes to change over.
Your accounting time will increase
Sadly, you’ll need to start spending more time on your books anyway. This is going to mean that you no longer carry out one massive tax return, but instead do it in smaller portions across the year. Quarterly update will be expected, and it will mean that you need to start spending more time getting used to the impact that MTD will have on you professionally.
If you are used to just sending all of your receipts in a big box and letting your accountant sort through it around December time, you need to get used to being more proactive when it comes to managing your tax.
Tax tricks won’t work so well
Another implication is that avoiding tax is no longer going to be quite so simple as it was when using the old system. Quarterly data will mean that there is less room for error and for moving around figures – not that you would do that, of course!
While you won’t be able to make quite so many tricks work as you might have done in the past, this will benefit the country in the long run. It might not be a great sounding solution for your business today, but it’s going to benefit everyone as the years go on. It’s not going to be stopped now, either, so it’s better to be prepared for what is to come.
Using software you can trust
Part of the problem is going to be making sure you are using MTD-eligible accounting software. You see, many taxation software systems will simply not be cut out for usage in this way. If you intend to keep using the software that you presently use, contact the company to find out their plans for becoming MTD-ready.
Otherwise, you should look to use a trusted Making Tax Digital software package. The implications and the damage caused by not using MTD-ready software will far outweigh the stress involved in making the change to a new software package. Making sure your software is compatible is your #1 priority.