It’s not often that the Government tell you how to do something. Yes, they often tell you what you can (and cannot) do but how you do it is often up to you.
In 2015 the UK Government proposed a bold new plan with the aim of creating the most technologically advanced tax system in the world. They have experienced several setbacks along the way but in April 2019 businesses will be faced with ‘Making Tax Digital for VAT’.
From next spring H M Revenue & Customs require VAT registered businesses (with turnover over £85,000) not only to submit their VAT returns electronically but also maintain their accounting records in electronic format.
Now you would be forgiven for thinking that HMRC would provide the resources to allow businesses to comply but I’m sorry, they haven’t. Instead, HMRC have explained their idea to third party software developers who have each created their own version of compliant software.
Whether the taxpayer wishes to adopt a fully internet based package or retain the data within their own ‘desktop’ environment, the connectivity needed between the software and HMRC will mean all software must have an element of “Cloud” Accounting.
Put simply, VAT data will have to be stored or transferred via the web at some point.
Thomas Westcott has been using wholly web-based Cloud Accounting software for several years and understandably the uptake by our clients has been significant.
For many businesses, a relatively inexpensive package can revolutionalise the way financial records are kept, the way you manage your business including cashflow management and the way that we as Accountants can interact with you.
A common question raised is one of security. How secure is the data? Who has access to it? Where is it stored? In the post GDPR era these are all questions that need to be dealt with.
Generally speaking the level of security is similar to that of online banking. Speaking of which, linking bank account records to the Cloud Accounting software is one way HMRC anticipate that the quality of record keeping will improve. Anticipated record improvement is why Making Tax Digital will extend to all VAT registered businesses and will also be used to assess income tax and corporation tax in the future.
The message to businesses is clear – It’s time to get digital!
If you need any advice on Cloud Accounting or Making Tax Digital then please contact me or your local Thomas Westcott contact. You can also visit our Cloud Accounting page for more information.
By Matt Portman