Cloud Accounting Software and MTD
We welcomed the announcement of the new timetable for Making Tax Digital that was published on 13 July 2017. This means that Making Tax Digital will not take effect until April 2019 when it will only be mandatory for business over the VAT threshold.
Under the new timetable:
- only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records, and only for VAT purposes;
- they will only need to do so from April 2019; and
- businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.
The move to digital is a big step forward but it should not impose any unreasonable admin burdens. It should allow enough time to implement the system and to ensure it will work.
With the introduction of cloud accounting software and third party Apps, it will help with the digital record keeping and it will give the users a clearer picture of financial position in real time. Some of the features of cloud accounting software are:
- Bank feed – the bank feeds the data directly into the accounting software;
- Purchases invoices or expenses receipts – take a photo of invoice on the smart phone and it is posted automatically;
- Invoicing – sales invoices can be raised from the smart phone;
- Financial information – the business’s financial information, such as bank balance, amounts owed by customers and amounts owed to suppliers, can be displayed on the smart phone after the installation of cloud accounting software Apps.