Now we are in 2017, businesses need to start preparing for the Government’s proposals to make small and medium-sized enterprises (SMEs) submit their quarterly return online as part of its Making Tax Digital (MTD) programme.
MTD is potentially the biggest shake-up in tax return reporting since the introduction of self-assessment and could mean record maintenance via software that is compatible with HM Revenue & Customs’ (HMRC) own systems as well as quarterly online reporting. However, according to recent research, the majority of small firms are unaware of the proposals and have not started to plan a strategy that will mitigate the effect of the changes on their business.
The changes will be phased in from April 2018, starting with income tax and National Insurance Contributions NICs) going digital for large concerns, then small firms and Corporation Tax will go digital in 2020.
This means that SMEs have just over a year from now to make changes to the way they keep their records and should look at how they can transition from paper-based records to the mandated digital system. If they fail to do so in time, they could face fines from HMRC.
Firms will need to move to cloud accounting, which will reduce manual data entry through using automatic bank feeds, automatic analysis of transactions and invoice scanning and real-time financial reporting.
However, given the lack of awareness of the changes, businesses should start planning now, including starting to shift company data from their own server to cloud-based systems. They will also need to train employees to work online via web-based systems such as online banking, DropBox or other cloud-based file servers.
Any business owner with concerns should therefore contact their professional adviser, as a plan now will save considerable, time, money and worry when the changes kick in.