The government’s Making Tax Digital (MTD) initiative looks set to make the UK’s tax system one of the most digitally advanced tax administrations in the world. By the end of 2019, over 10 million individuals across the country will no longer have to run the gamut of the annual tax return saga; they’ll be able to see their tax liabilities and entitlements in real time in one place and be able to click and interact digitally with HMRC seamlessly.
But what does Making Tax Digital mean for the businesses, accountants and agents? They now have a whole new world of responsibility, compliance and client handholding to embrace as the death knell for the receipts shoebox tolls.
Firstly, timescales. When the Big Roll Out was announced in the 2015 Making Tax Digital roadmap, the pace of change was considered too fast for too many and a delay thankfully followed. An obligation for businesses to be fully compliant with MTD will now take effect in April 2019 and will begin with their VAT reporting. Those with VAT-able turnover exceeding the current £85,000 threshold will be mandated to go digitally compliant with their VAT transactions for VAT return periods from 1st April 2019. The smallest businesses will be able to opt in voluntarily.
The MTD VAT pilot soft-launched in April 2018 with the release of the VAT APIs that enable third-party software products, such as Microsoft Dynamics NAV and Dynamics 365 Business Central, to connect to HMRC’s back-end. The choice now for businesses with all embracing Enterprise Resource Planning (ERP) applications like these is whether to make the leap early on and get the learning curve navigated or to wait and learn from those who go first. The government has stated it won’t be widening the scope of MTD for business beyond VAT reporting until the systems are working properly, and certainly not before April 2020 at the earliest.
A more agile, effective and efficient tax system is good news for every business and healthy for the economy too. Digitisation will reduce both the cost to businesses and HMRC, as well as the stress associated with getting tax wrong, which in 2014/15 amounted to over £3.5 billion of lost revenue associated with VAT alone.
In reality, the transition to a wholly digitised tax system is simply an extension to the plethora of everyday business tasks that so many organisations are currently conducting online, especially those whose ERP systems already give them control over their business data alongside actionable insights and automated workflows.
It’s worth remembering that real time information (RTI) reporting is nothing new for HMRC. It was introduced to employers in 2013 to process PAYE, NI and salary data directly rather than via the traditional P35 submission. However, post-PAYE RTI implementation, the challenge to rebuild a somewhat shattered business confidence after the headaches caused by HMRC’s inaccurate processing of employer-submitted RTI information is very real. That said, many reporting errors have been due to poor IT specification; making the right choice of end-to-end business software and an implementation consultant who will ensure you get it right first time has never been more critical to business transformation in the digital arena.
Digitisation is certainly the next logical step when it comes to optimising business efficacy, but what can MTD, possibly the most far-reaching digital initiative thrust upon employers by HMRC, really do for you?
Getting tax wrong or filing late isn’t just a costly mistake to make; the ramifications go deep beyond the ledger. The unfathomable time spent trying to resolve disputes and unexplained entries with HMRC is legendary – likewise the headaches incurred by hours communicating when chasing payments, codes and finding answers to even the simplest of questions. Even the man who spent five years fronting an advertising campaign telling us ‘tax doesn’t have to be taxing’, Adam Hart-Davis, called for the tax system to be simplified. The marketing person who coined the phrase had clearly never experienced HMRC’s online filing hitches.
Since one of MTD’s key objectives is to dramatically reduce the number of avoidable tax mistakes, businesses should welcome this benefit as a blessing of gargantuan proportions.
By tapping into the cloud with business tools and resources that were once the domain of large-scale enterprise, smaller businesses can bolster their capabilities and find it easier to access, share and exploit business data. Put simply, migrating to the cloud can help organisations of all sizes become more agile and achieve and manage additional revenue growth, particularly when a suite of tools is used. CRM, payroll administration, time registration, project management, order processing and invoicing and inventory management are invaluable online business tools that can boost performance and see the bottom line flourish. Cloud-driven growth is a game-changer that can help businesses improve the quality of their services, deliver projects on time and reduce admin workloads.
Cloud-based business solutions, including the supremely flexible Microsoft Dynamics NAV and Dynamics 365 Business Central, deliver considerable value through integration with other cloud services and a reassuringly low total cost of ownership (TCO) for SMEs who want a cost-effective transformation, particularly when it comes to RTI reporting and the impending MTD roll out.
The MTD mandate will ensure more businesses go digital and help them to achieve a business transformation they might never have thought possible. A 2017 survey by UK200Group, the UK’s leading membership association of over 150 independent chartered accountancy and law firms, revealed that 65% of members’ SME clients were not using software to manage their financials. Indeed, their bookkeeping methods ranged from the “shoebox system” (16%), manual records (23%), computer (i.e. spreadsheets) (27%) and software (35%), which means the vast majority will have no option but to adopt a new software system for their quarterly tax reporting.
Signing up to an end-to-end ERP system early will not only give organisations the experience they need to achieve compliance in time, it’ll ensure they’re playing an integral part in advancing the digital revolution that will make life – and potentially the bottom line – better for everyone.
Making Tax Digital is happening and by 1st April 2019, most businesses will need to be up and ready to embrace the change – and reap the benefits – that the new tax system will bring. There may be several months to go before organisations are mandated to keep their records digitally and to provide quarterly updates to HMRC for their VAT, but this is no time for inaction.
If you’re already using an ERP or similar package to manage your business activities, whether it’s just your financial department or your entire operation, you’ll still need to ensure it will incorporate MTD functionality when the time comes or your compliance will be at risk. If you’re considering upgrading your system, there’s never been a better time to leave your legacy platform behind and take more control of your business data – and that’s not just the information you’ll be supplying to HMRC.
If you’re one of the aforementioned 65% who are currently committed to manual records, computer spreadsheets or the humble shoebox, now’s the time to get real. You should be talking to a trusted partner who can guide you through the process of implementing a new ERP platform that will come with the requisite MTD functionality to ensure you remain compliant and ready to embark on a journey of transformative change.
Microsoft Dynamics 365 Business Central or Dynamics NAV are two of the most comprehensive and flexible ERP solutions on the market and both will have MTD functionality to ensure users meet the mandate deadline.
Both Dynamics NAV and Dynamics 365 Central are mid-range, end-to-end business management solutions that are designed to simplify and unify business operations. They’re also built to evolve – these are transformative platforms that enable users to implement them quickly and be sufficiently flexible to adapt to their changing business needs in real time.
Most reassuringly, these products are built on a foundation of trusted Microsoft technologies that serve many millions of users around the world. The brand’s familiar interface, its compliance qualities and unrivalled integration benefits give users the confidence they need and the support of a multitude of organisations who can support them through implementation and beyond.
If you’re ready to think seriously about MTD and how it will affect your ability to report in real time and remain compliant in the process, talk to a Microsoft Gold partner who can help you make it happen. Here at TVision. we already understand the intricacies of the MTD initiative and how your platform can help you get your tax right from the off. For a free demonstration or to discuss if Dynamics NAV or Dynamics 365 Business Central are the right business solutions for you, please contact the TVision team.
For more information on Making Tax Digital, visit the HMRC website.
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