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Making Tax Digital is a bold initiative, which has come from a practical need to improve the accuracy of people’s individual tax affairs, while effectively signalling the end of the traditional annual tax return.
Following the original announcement of the 2017 general election, the government dropped Making Tax Digital (MTD) from its Finance Bill in April, effectively putting the scheme on hold.
However, from a practical viewpoint, the UK’s business accounting services need to be prepared for a digital future, because real change will come from the grassroots demand of their clients and customers.
We think it’s helpful to think of the principle behind MTD as something which will benefit huge numbers of businesses and individuals, even if the scheme itself is delayed. Accounting services meet a need, and
that need is changing.
Smarter, More Efficient Accounting
Accountancy is a service as well as a professional discipline. You can view this service in several different ways. For some, the accountant fulfils a largely bookkeeping role, but to maximise the benefits of your accounting service, you should treat your accountant as a close business advisor.
Much of what we do for people is to help save them time, which s better spent on their core business development. However, smart, efficient accounting is, to an extent, intimately linked to business development.
Businesses want to grow and thrive, and maintaining efficient accounting will help them do this, while giving them greater clarity about planning for the future.
So where does Making Tax Digital fit in?
Well, the principle behind MTD is to help people more easily integrate their accounts into their daily business affairs, so that it’s not a case of having to put everything together in one go, with all the potential for stress and error that entails.
But, you might ask, does this not make my accounts more time-consuming, if I must consider my tax returns and associated issues more regularly?
This is where smarter accounting comes in, and where our professional guidance will prove invaluable. It’s time to think of your accountant as more of a business partner and less of a service provider. Then you will properly reap the benefits of keeping more efficient accounts and approaching your taxes dynamically and proactively.
What’s the point of Making Tax Digital?
This should make checking details easier, and, where queries, issues or problems arise, resolving them will be more straightforward. Its much easier to rectify a problem at the time, rather than having to try and recall the situation a year down the line.
A big part of this is what HMRC calls tax in real time. This means HMRC will process tax information from businesses and individuals as they receive it, keeping up to date records so, in theory, you will know what you owe in tax at any time.
The stated aim is to prevent errors and stop tax due and repayments owed building up.
Of course, for HMRC to be able to accomplish this requires changes to how its customers, you, process your tax accounts.
The solution, for all, is digital. HMRC customers will, eventually, have a single HMRC online account, which will provide them with a clear picture of what they owe, and what they are entitled to.
In other words, it will be like online banking.
The benefit of going digital is that customers can then interact better with HMRC, and at a time that suits them. They will have full visibility of their accounts, and they will use digital record-keeping that will connect them to their HMRC account.
For individuals, they will have all their information in one place, and third party reporting will mean that HMRC will gain information it would otherwise depend on Self Assessment forms for.
The object is to simultaneously improve the quality and reliability of the information HMRC gets while reducing the burden on the individual to report it. Ultimately, this should mean the end of the annual tax return.
Getting your tax right can feel like a challenge, and prone to error, because while accounting services can help, the burden is on the business owner to supply the correct data in the first place.
HMRC estimates that there is £8bn annually in uncollected tax due to avoidable taxpayer error and carelessness. Understandably, it wants to plug this hole.
MTD would introduce quarterly updates for most businesses, including the self-employed and landlords. It would introduce digital record-keeping and establish an interactive system which prompted customers to keep their records up to date.
Overall, HMRC wants to make modernise the tax system using digital technology, and in so doing, help businesses to pay their taxes with minimum fuss and disruption.
What We Think
Change is coming, while it might not be from HMRC. More and more businesses are tech-savvy when it comes to keeping their accounts, and, once they adopt new systems, they can see the advantages.
The demands of an ever-changing marketplace require businesses to be agile and adaptable, and quick to respond to change. They must also be proactive in developing strategies for growth.
How they manage their accounts should be a part of this approach, and a dynamic mindset must include engagement with new technology to improve efficiency. But it’s more than that. It’s about how accounting should work as a key element in business development, and how it should be about continual engagement and projecting forward as well as consolidating.
We want businesses to thrive, and we’re prepared to meet their demands, and to offer our advice and support to help them face the challenges ahead. Taking a proactive approach to accounting is the right way to take a bold stride forward.
We’re ready, are you?
Get in Touch
For dynamic, proactive business accounting services in Burnley, Lancashire and across the North West, please get in touch. We’re approachable and helpful. Give us a call on 01282 902456, email firstname.lastname@example.org or visit the contact page on our website and fill in the contact form – we’ll reply as soon as we can.