Most SMEs understand that deadlines are a part of doing business, but while they might be fully focused on their own affairs, how aware are they of external deadlines which might affect them?
One of these is the UK Government’s plan to introduce its digital tax regime in 2019.
Making Tax Digital (MTD), once rolled out, will require every business in the UK to use digital accountancy software, regardless of their current bookkeeping systems.
“In 2018, a QuickBooks report found that over 40% of small business owners were still unaware of Making Tax Digital. It’s clear that accounting services will need to play a vital role in helping SMEs get to grips with MTD.”
What Making Tax Digital Means
MTD extends the concept of filing in digital tax returns, which many SMEs already do, to reporting income and gains in real time using digital accounting software.
The Government thinks this will make it easier for businesses to keep on top of their tax.
“Making Tax Digital is the full digitalisation of business tax affairs, with the onus being on businesses themselves to adapt”
This will require SMEs to use software or apps such as cloud accounting platforms. For the moment, HMRC is accepting spreadsheets, but only if businesses can link them digitally to HMRC.
“As the Making Tax Digital scheme currently stands, the first phase involves digitising VAT, so anyone meeting the £85,000 VAT threshold submit their VAT returns digitally by April 2019.”
This new regime will require that businesses keep digital records of their sales, with a breakdown of the VAT they attract. The same will apply to purchases.
The Implications of MTD for SMEs
“There are cost implications for SMEs for them to be properly prepared for the phasing in of MTD. Obviously, the degree to which they must adapt will depend on how they currently are set up.”
Research indicates that 65% of SMEs currently do not manage their accounts using accounting software.
“Some SMEs will need to invest in accounting software; some already rely on an external accountant, but they may need to change this relationship to ensure they are fully digitally compliant”
Potential costs to SMEs include upgrading or purchasing hardware or software; and time spent making themselves familiar with digital tools and new processes for quarterly document submissions.
They may also need to include additional accountancy costs.
The Fixed Fee Accountancy Solution
One way SMEs can control the costs involved in Making Tax Digital, and have the confidence that their tax affairs will be digitally compliant is to bring in professional accounting services on a fixed monthly fee basis.
Mike concludes, “This means they can budget effectively, without worrying about having to pay for expensive advice and support by the hour. And, if they choose the right package, they’ll get all the access to accounting software they need, along with unlimited advice whenever they need it.”
To discuss your options to ensure that you are MTD-compliant, please call One Click Group on 0345 557 1287.
Alternatively, click here for One Click Group’s freely available guide to fixed fee accounting for small businesses.