It's now only 7 months until Making Tax Digital (MTD) for VAT comes into force.
If you are a business which has sales above £85k a year and you currently submit your VAT returns through the HMRC website, MTD will most likely impact you from April 2019.
The impact on SMEs
As with any change in business regulation, MTD has been met with a lot of doom and gloom - but we're looking at the positives!
So firstly, how will it impact you?
No ifs or buts, you've got to put your records on a computer - either using bookkeeping software or a spreadsheet.
If you use a spreadsheet (or a non compliant bookkeeping solution) you'll need to use bridging software to submit your VAT returns. Bridging software needs to be 'linked' to the underlying accounting data.
If you are using a compliant bookkeeping system you will submit your VAT returns through that software (no more using the HMRC website to submit returns)
Our advice for most businesses is to ignore the bridging option and get yourself on a compliant system and this is for two very good reasons;
This is stage 1 of MTD. This project will eventually cover corporation tax and there are no guarantees that at that point MTD will allow spreadsheets and if it does it will be more bridging software.
Moving on to a compliant system can bring some fantastic benefits, which we're going to focus on below
The benefits of a modern system
If you set up your accounting system in the right way you'll never look back;
less time spent entering information
cut down on your mistakes
have better business information
keep track of your VAT and tax positions
reduce the time it takes to collect money from your customers
easily reduce your overheads
less filing / paperless records
accept credit card payments and collect direct debits easily
There are hundreds of business apps that link with MTD compliant accounting systems so you can tailor your solution to something that really works for your business. And the cost of all of this is relatively inexpensive; the benefits a good system brings really outweighs the cost.
Our favourite 'stack'
With so many options out there, where do you start? There are a few solutions that work for most SMEs;
Accounts package - Xero
Your accounts package forms the back bone of the system you put in place. We recommend Xero as it's one of the easier systems for business owners to find their way around, has some great features and they have confirmed they will be MTD compliant.
Invoice capturing - ReceiptBank
If you have not used ReceiptBank before you are in for a treat. Take a photo of an invoice or a receipt using your phone and ReceiptBank can extract all the information (supplier, date, amount etc) from the invoice and code it to the correct account code. A copy of the invoice is then stored in ReceiptBank and in your accounts package - bye bye filing.
Overhead review - Reducr
Reducr is great - they link to your accounts system, review all of your overheads and let you know where you can save money. Best of all, they do it for free
Online payments - Stripe
If you would like your customers to pay your invoices using their debit/credit cards, there a number of solutions for you, but we like Stripe. Really quick to set up and link to Xero and you can see when people have paid you directly in Xero, so no need to check through lots of different systems
Direct debits - GoCardless
If you are running a subscription /rental business you may want to take direct debits but previously this has been a complicated process. With GoCardless you can be up and running within minutes. The direct debits are linked to the invoices you issue so really easy to administer.
There are so many apps out there it can be a bit mind boggling - we've helped our clients build and administer systems that really work for them so we know that you can get something that fits your business perfectly - it just takes a little bit of research
Making MTD work for you
It's 7 months until the changes are effective, so make sure you know how MTD will affect you as soon as possible.
If MTD means that you do need to change how you are submitting your VAT returns, take the bull by the horns and make that change work for you.
Take some time investigating what options will work for you and make sure you leave yourself enough time to make effective changes.
It's a great opportunity to reduce the time your spend on admin and improve your business insights, so if you do have to change how you are doing things, make the change positive.
Not sure where to start with all of this? Book a free 30 minute call / video meeting with us and we can help you get started:
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