Cloud accounting and Making Tax Digital for VAT registered businesses
We’ve provided an advice article about the options for cloud accounting software and provided a look at automating and speeding up your bookkeeping and record keeping systems. Today, we’re looking at VAT registered businesses, and how cloud accounting can lend a helping hand when counting down to Making Tax Digital.
Making Tax Digital
More hoops to jump through, right? Wrong, actually. ‘Making Tax Digital’ could, and should if you approach it correctly, make it easier for you to get your taxes right the first time and stay up-to-date with tax returns throughout the year. All in all, it’s a GOOD thing.
April 2019. That’s the date that Making Tax Digital will go live. Those that are VAT registered, and turning over £85,000 or more, are first up, and will need to submit their VAT returns via an ‘Application Programming Interface’ (API) … put simply, it’s just a technical term for how your cloud accounting system ‘speaks’ to the computers at HMRC.
Sage 50/Sage 50cloud Accounts, Xero and QuickBooks desktop are already ready for the Go-Live date, while Sage One, QuickBooks online, FreeAgent and Kashflow have promised to be compliant in time for the deadline.
While some businesses have dug their heels in and delayed switching to the cloud, now is the time – it’s no longer an option. ‘Making Tax Digital’ is exactly that – digitalising VAT returns, replacing paper-to-manual processes once and for all (though these only account for 2% of all returns nowadays anyway).
Cloud accounting and ‘Making Tax Digital’ – A match made in VAT return heaven
So you’ve read our article on why cloud accounting is really good. If you missed it, here’s the plus points of cloud accounting in a nutshell… it bolsters your security, lowers IT costs, increases mobility, improves real-time financial insight, and reduces the time it takes to wade through your business figures.
When it comes to VAT, this software can also collate, create and prepare your return for you – simply showing you the return before you (or your accountant) hits ‘submit’. It will then confirm that all has gone through as it should have.
Cloud accounting can also help you overcome a whole host of common VAT reporting issues, such as:
- Accuracy of dates
- Out-of-date records
- Reclaiming VAT
- Incomplete VAT invoices
So while cloud accounting is no longer a nice-to-have, and is instead an effective necessity, it can still bring a multitude of benefits to your business – far beyond preparing for, and complying with, the changes coming your way for submitting your VAT returns.
But I currently use a spreadsheet for my accounts?
The use of spreadsheets will be permitted although they will need to be combined with third-party commercial software that meets HMRC’s requirements (and which, 6 months from being needed, is still very unclear) which seems counter-productive. Surely this is the trigger you need to move your numbers into the cloud?
The HMRC have the desire and ability to force this through – there’s nothing to be gained by arguing! As such, embracing and adopting compliant accounting software into your business model should be considered sooner than later to allow you time to get used to it … and then to benefit from the up-to-date financial reporting you can receive. Seek out expert support to help you transition across.
Understanding Making Tax Digital from Yorkshire Powerhouse
Now you’ve read our advice article on Making Tax Digital – have you any more questions?
Here at Yorkshire Powerhouse, we’re happy to help as much as possible – is there anything else we can do to help you, do you have any further questions or can we help introduce you to an expert – please let us know:
A Yorkshire Powerhouse advice article on the options available to a small business of the main cloud accounting software options Read >