What Will a New Government Mean for Making Tax Digital?

Androulla Soteri, tax development manager at our member firm MHA MacIntyre Hudson, says businesses shouldn’t be complacent about the technological change Making Tax Digital (MTD) represents:

“Despite public perception, Making Tax Digital (MTD) has not been dropped. We’re however very much in limbo, and where we go next depends on the outcome of the election.

“MTD was removed from the Finance Bill in order to push the bill swiftly through parliament before the general election. If the current Government returns next month with a solid majority, MTD is likely to be inserted into an early-summer Finance Bill. If they return in a weaker state, MTD is likely to proceed, but on a slower track and not necessarily in the way it’s set out now.

“If there’s a change in Government, or a coalition, MTD could undergo significant changes. The Labour leader has expressly vowed to scrap the burden of quarterly reporting for small businesses with a turnover under £85,000. The Liberal Democrat’s position is less clear. While they don’t appear to have made any express opinions, they have inferred support for the Association of Accounting Technician’s (AAT’s) suggestion that the exemption should be in line with the personal allowance, and that the process should be phased in over a period of three years on the basis of turnover thresholds. UKIP have remained silent.

Dealing with the Inevitable

“So where does this leave tax payers and agents? The reality is that digitalisation will eventually come in, regardless of which Government we have. Therefore, there’s an argument for dealing with the inevitable sooner rather than later.

“That said, the way technology is impacting businesses more broadly means that the need for technological advancement could overtake the speed at which MTD will be implemented.

“Management accounts were traditionally the preserve of larger businesses. However, the increasingly entrepreneurial and competitive environment has created a need for businesses of all sizes to have more frequently updated financial information. If a company doesn’t strike on opportunities while the iron is hot, they miss out. The ability to move quickly very often depends on the financial position of the business, but looking at the prior year’s accounts doesn’t necessarily shed light on the current position.

“Data analytics software is now capable of producing things like cash flow forecasts in a matter of minutes, at the click of a button, provided up to date financial information is readily available. Businesses need to ensure they are not being left behind by this. It takes the concept of technological obsolescence to another level.”

If you have any questions or would like to talk to use about Making Tax Digital in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.

Cloud Accounting for the Healthcare Sector

The use of cloud accounting software, QuickBooks Online (QBO) from Intuit is resulting in better reporting, improved performance and time savings for our Healthcare sector clients, and here’s how:

  1. Instant Access

As long as you have a stable internet connection, you can access your data anytime, anywhere. No software installation, no processing at a single desk or single office.

  1. Automatic Bank Feeds

The software is designed to sync automatically with most online banking. The transactions will appear in QBO as they appear on your online accounts and you then simply allocate payments and receipts to the correct place. As more transactions are added, the intuitive system starts to recognise your regular entries or match payments to previously entered purchase invoices, speeding the process even further, and ensuring consistency of transaction processing. Rules can also be set to split down complex transactions or automatically post entries.

  1. Import of Monthly NHS Statements

We can assist you with the import of the monthly payments and deductions statement received from the NHS, breaking down each individual element of the payment so it can be recorded accurately, ensuring management of information at the touch of a button.

  1. Multiuser Access

With our QBO offering, you can have as many users as you like, all for the same monthly fee. Users can have full, partial or reporting only access. Tasks can be delegated across users and managing partners can access management information from their own log in. We would also have access, so we can help you with queries on postings or help with interpreting performance.

  1. Paperless Possibilities!

There is a scan and attach feature for each and every transaction, which means all records could be digital. This could eliminate storage costs or space needed for filing, freeing up rooms to become income generating.

  1. Reporting Capabilities

Standard reports can be customised with ease to show the information you want. These reports can then be set to send to specified recipients on set dates, if required.

  1. Value for Money

Licence fees start at £10 (plus VAT) per month, making it a great price point and cheaper than a lot of software renewals. Licences include updates and support from Intuit. We are also happy to offer license only subscriptions.

Oh and here is an extra reason – Because Making Tax Digital is on its way!

From April 2018, HMRC are likely to implement their Making Tax Digital plans and part of this process will require you to keep your records up to date and on digital software that is compatible with HMRCs portal, in order to meet the quarterly reporting requirements. QBO will be compatible, this is why it may be a good idea to start thinking about the transition sooner rather than later.

If you would like to talk to us about Cloud Accounting or Making Tax Digital in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Cloud Accounting team.

This article originally appeared on the blog of our member firm, Moore & Smalley.

Making Tax Digital is ‘Up in the Cloud’

Peoples habits are changing. Gone are the days when you recorded information solely by hand. Now, online technology offers us the ease of access and flexibility that we have all come to depend on. With the introduction of smart phones and tablets, we are seeing this accessibility grow and it is becoming the norm to view online information on the go.

According to statistics, 82% of online users use their mobile phones to access the internet, and 49.5% check their emails via their smartphone. As more and more people turn to these devices, our expectations of what technology can do for us is growing.

With Making Tax Digital taking effect from April 2018, it seems that the government has also recognised this trend and soon, even your taxes will be available online. These changes will not only effect how you process the information required by HMRC for your tax submissions, but will also allow you to view your tax position throughout the year.

As part of the Making Tax Digital process, you will be required to upload all your records to HMRC on digital software, which is where Cloud Accounting can help. By opening a cloud account now, you will be ready for these new policies to come into effect and the transition into digital taxes will be much smoother… and that’s not all!

How can Cloud Accounting help improve your business?

Firstly, a Cloud Account allows you to assess your financial position throughout the year. You can scan invoices into your account on a daily basis, which means you will always have an up to date record of your finances at the tip of your fingers. This is hugely beneficial, as it means you no longer have to wait till the end of the year to find out how your business is doing, and allows you to assess your cash flow and make necessary changes to maximise your profitability.

You can also connect your Cloud Account to your Bank account, which means any transactions you make can be fed straight into the accounting system, matched with the accounting entries and categorised. This not only helps you organise your finances, but allows you to clearly see where you are spending the most money and which areas you could make savings.

Cloud accounts are easily accessible. You can grant access to multiple team members, including your accountant, and as all the information is stored in one place, any changes you make are immediately applied and can be viewed by everyone. With the added ability of being able to access your account from a number of different devices, including desktops, smartphones and tablets, whether you are enjoying a well-deserved holiday or commuting on the train, you have the flexibility to view your finances from anywhere at any time.

Furthermore, your cloud account can help you reduce costs. You will no longer have to upgrade your equipment on a regular basis and as the Cloud is online technology, you will no longer need to back-up your software.

With the benefits that software such as cloud accounting can bring, we really are in an age where technology can help make our business profitable. With constant advances all the time, it’s exciting to see how technology can help our businesses succeed and provide us with the flexibility and support to meet our daily demands.

If you have any questions or would like to talk to us about Cloud Accounting or Making Tax Digital in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, Monahans.

Making Tax Digital is 'Up in the Cloud'

Peoples habits are changing. Gone are the days when you recorded information solely by hand. Now, online technology offers us the ease of access and flexibility that we have all come to depend on. With the introduction of smart phones and tablets, we are seeing this accessibility grow and it is becoming the norm to view online information on the go.

According to statistics, 82% of online users use their mobile phones to access the internet, and 49.5% check their emails via their smartphone. As more and more people turn to these devices, our expectations of what technology can do for us is growing.

With Making Tax Digital taking effect from April 2018, it seems that the government has also recognised this trend and soon, even your taxes will be available online. These changes will not only effect how you process the information required by HMRC for your tax submissions, but will also allow you to view your tax position throughout the year.

As part of the Making Tax Digital process, you will be required to upload all your records to HMRC on digital software, which is where Cloud Accounting can help. By opening a cloud account now, you will be ready for these new policies to come into effect and the transition into digital taxes will be much smoother… and that’s not all!

How can Cloud Accounting help improve your business?

Firstly, a Cloud Account allows you to assess your financial position throughout the year. You can scan invoices into your account on a daily basis, which means you will always have an up to date record of your finances at the tip of your fingers. This is hugely beneficial, as it means you no longer have to wait till the end of the year to find out how your business is doing, and allows you to assess your cash flow and make necessary changes to maximise your profitability.

You can also connect your Cloud Account to your Bank account, which means any transactions you make can be fed straight into the accounting system, matched with the accounting entries and categorised. This not only helps you organise your finances, but allows you to clearly see where you are spending the most money and which areas you could make savings.

Cloud accounts are easily accessible. You can grant access to multiple team members, including your accountant, and as all the information is stored in one place, any changes you make are immediately applied and can be viewed by everyone. With the added ability of being able to access your account from a number of different devices, including desktops, smartphones and tablets, whether you are enjoying a well-deserved holiday or commuting on the train, you have the flexibility to view your finances from anywhere at any time.

Furthermore, your cloud account can help you reduce costs. You will no longer have to upgrade your equipment on a regular basis and as the Cloud is online technology, you will no longer need to back-up your software.

With the benefits that software such as cloud accounting can bring, we really are in an age where technology can help make our business profitable. With constant advances all the time, it’s exciting to see how technology can help our businesses succeed and provide us with the flexibility and support to meet our daily demands.

If you have any questions or would like to talk to us about Cloud Accounting or Making Tax Digital in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, Monahans.

Making Tax Digital is Going Ahead Without Delay

The Treasury Committee recently released a 50 page report calling for HMRC to delay implementing their ‘over ambitious’ Making Tax Digital (MTD) plans until 2019/2020. They had also called for implementation to coincide with any changes resulting from a Brexit deal to minimise the number of system-based changes businesses will be exposed to, along with voluntary rather than mandatory introduction. Further the lack of evidence regarding the free software that would be available and the need for substantive cost-benefit analysis was raised.

On Tuesday 31 January HMRC finally released their response to the MTD consultations, as was promised by the Chancellor in the Autumn Statement. Not only was the call for a delay entirely ignored, but there was no reference to the interaction with Brexit, and while a detailed explanation of how it has arrived at its conclusions on the potential revenue yield of MTD was provided, something that the Treasury Committee had called for, a reasonable justification for the assumptions was absent.

In fact one of the key points of general interest to come out of their ‘Bringing Business Tax into the Digital Age’ response was that they estimate businesses will only incur a one-off transitional cost of £280 per business on average and that will be followed by small on-going annual savings. This is in contrast to the Federation of Small Business (FSB) estimate of £2,770.

Even if HMRC’s estimate is correct, if the 3.3m self-employed individuals, 1.6m companies, 400k partnerships, 900k landlords and 600k self-employed and rental property-owning individuals identified in their impact assessment all spend £280 on conversion on average, in the best case from HMRC’s perspective where taxpayers are only paying tax at 20%, this tax deductible expense for business will result in £380.8m of lost revenue for HMRC at it’s most conservative estimate. No evidence has been put forward to suggest this figure has been factored into their estimate of the extra net tax revenue MTD will bring.

If the FSB estimate of £2,770 is conservatively applied to only the self employed individuals, landlords and self-employed and property-owning individuals, HMRC is looking at £2.66b in lost tax revenues. This far exceeds the now revised £2b contribution (from £945m) estimate that HMRC expects MTD to bring.

So while the numbers raise a series of questions, what else did HMRC’s response to the consultation period deliver?

Businesses will be able to continue to use spreadsheets to record receipts and expenditure, which they can then link to software to automatically generate and send their updates to HMRC – most assumed this was going to be the case anyway.

Free software will be available to the majority of the smallest businesses, although we don’t yet know who will be providing this or how the smallest of businesses is defined.

Businesses that cannot go digital will not be required to do so – the details are highly restrictive in who they apply to.

All self-employed businesses and landlords with a turnover under £10,000 a year will not have to keep their records digitally or make quarterly updates, but can do so if they wish, but an increase in this limit is still to be considered – with only 14 months left to go for implementation!

The option to account for income and expenditure on a simple ‘cash in, cash out’ basis will be extended for self-employed businesses and unincorporated landlords.

Charities will not have to keep their records digitally or make quarterly updates.

Taxpayers will have at least 12 months to become familiar with the changes before any late submission penalties will be applied; HMRC will also re-consult again in the spring on a new penalty model.

HMRC will pilot these digital systems with hundreds of thousands of businesses before rolling them out to ensure the software is user friendly, and to give businesses and landlords time to prepare and adapt.

And finally… somewhere along the way, MTD has been renamed to MTDfB (making tax digital for business)!

If you have any concerns or would like to discuss any of the issues raised in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.

Making Tax Digital for the Legal Sector

Major changes are being made to the way in which all taxpayers interact with HM Revenue and Customs (HMRC). The government is referring to these changes as Making Tax Digital (MTD), and they are proposing a staged introduction to the new rules, starting for many in April 2018.

We have prepared and submitted a comprehensive response to HMRC’s consultations on Making Tax Digital with regard to how it impacts our clients and have suggested matters to improve implementation for businesses. We are expecting further announcements to be made over the coming months.

The proposals are wide-ranging, but one of the biggest changes planned is an electronic quarterly report to HMRC of income and expenditure. Where the business is a partnership, the proposal is that one ‘nominated partner’ will take responsibility for the submissions, which then feed into each partner’s digital tax account.

As many legal practices are partnerships, we believe more consideration needs to be given to the practicalities of this. There is a need to maintain and protect the confidentiality of each member.

For legal practices it is a requirement of the Solicitors Regulation Authority that the nominated partner should have an understanding of the business financials, and this will need to be reflected in the Making Tax Digital proposals.

Software providers will play a big part in the changes. HMRC’s current proposals suggest that invoices must be electronically scanned into software, with this software automatically uploading summarised data (not the invoices themselves). It is not currently clear whether bespoke legal software packages are capable of submitting information directly to HMRC, and so it is vital that these software providers collaborate with HMRC, the legal profession and their accountants.

Any legal practices still using manual cash books or spreadsheets are likely to have to upgrade to meet the requirements. We also envisage that many partnership agreements will need updating.

Broadband is still a major issue in many rural areas. Whilst HMRC have suggested an exemption for those with no internet or computer access, it is not yet known how far these exemptions will stretch.

Watch this space for further information and feel free to speak to us about the accounting implications. Contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Professional Practices team.

This article originally appeared on the blog of our member firm, Larking Gowen.

What could Cloud Accounting do for you?

Cloud; a term used to refer to a state or cause of gloom, suspicion, trouble, or worry. And ever since HMRC released their Making Tax Digital consultation documents, never has the doom and gloom been more strongly felt. However, surrounding all the negativity, we want to bring some positivity to the picture. Here are 8 reasons why cloud accounting could transform your entire business for the better:

  1. Instant Access – Whether you’re at your desk or sunning yourself on a beach, maintaining your business’s records has never been easier. All you need is a mobile device, like a tablet or a smart phone, and a half decent internet connection and you never need to be tied to the office again.
  2. Clearer Overview of Financial Position – The days of waiting 12 months after the end of your accounting period for a set of accounts to tell you what you did over 12 months ago are gone. Cloud accounting allows you to know exactly where your business is at any one time. Cloud accounting software has features which integrate with document scanning, enabling invoices to be scanned and automatically sent to the accounting system on a daily basis, where the accountant can then check and confirm the entry.
  3. Automatic Bank Feeds – The software is designed so that it can sync with your bank, meaning that bank transactions are immediately fed into the right accounts and sorted by category.
  4. Multiuser Access – This allows you to collaborate with different members of your team. You can also give your accountant access to either review or edit the information, or indeed do all the processing on your behalf!
  5. Cuts Costs – Cloud accounting software is available from as little as £15.40 a month. The fact that it is on the cloud means that you don’t have to upgrade your equipment on a frequent basis. There’s nothing to install or upgrade and you’ll never need to do a backup again.
  6. Makes You Money – The software tells you what needs to be invoiced and when and allows you to easily keep track of which invoices are still outstanding. Never do you need to worry about cash flow management again.
  7. Frees Up Time for You to Focus on Your Business – As information is available in a timelier manner, you can log into your software and see how your business is performing, helping you to make important business decisions with greater ease and efficiency than you have ever done before.
  8. Because MTD is on its way! – We now know for a fact that the Government’s tax digitalisation plans are concrete and will be in effect form April 2018. Part of this process involves keeping your records on digital software that is compatible with HMRCs portal. So it’s a good idea to start thinking about it sooner rather than later.

If you would like any further information or advice, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.

Making Tax Digital: Some Questions & Answers

HMRC’s vision of the future is that all dealings with tax payers and agents will be digital.

The proposals for the new digital world were introduced in the March 2015 Budget. Then, in August 2016, six consultation documents were published and the closing date for responses is 7th November 2016.

It is expected that there will be more detail in the Chancellor’s Autumn Statement and also in the Budget next year.

Here is a summary of what we know so far:

What is it?

Making tax digital is a complete change to the way businesses currently report their income and expenditure to HMRC.

Under the current system, businesses prepare one set of accounts and report the information on the annual tax return, so there is one submission of information to HMRC.

Under the new system, there will be quarterly reporting of profits and then a further annual declaration, making a minimum of five submissions to HMRC each year.

When does it start?

April 2018

It is possible that the smallest businesses will be able to defer until April 2019 – this is one of the topics covered in the consultation documents – but for most business and landlords the start will be April 2018.

Who will be affected?

Unincorporated businesses and landlords.

Quarterly reporting is not confined to businesses. Landlords will also be required to report quarterly if annual rents will be in excess of £10,000. This will apply even if your main source of income is a salary or a pension and the rental income is just an extra.

Limited companies will be included later – in April 2020.

What will you have to do?

Use software or apps to keep your business records and provide regular (at least quarterly) updates of information to HMRC. These updates will be a summary of income and expenditure only – each transaction will not be shown.

The proposed time limit for submission of each update is 1 month from the end of the period.

Is anyone exempt?

  • Those with turnover of under £10,000. Note that business turnover and rental income will be added together so if you have self employed earnings of £6,000 and rental income of £5,000, your total income will be £11,000 which is over the threshold and you will be required to report quarterly.
  • Charities.
  • Those who “cannot engage digitally”. This means people whose religious beliefs prevent them from using electronic communications and people for whom online filing is not reasonably practical for reasons of disability or age, for example.

Do we like it?

Making Tax Digital represents a seismic shift in how businesses and landlords record their financial transactions and interact with HMRC.

Where a person wants to stick with current methods, whether paper records or spreadsheets, the new regime will create an extra layer of work. However, where taxpayers and/or their accountants embrace new ways of working, and in particular digital record keeping and cloud accounting, Making Tax Digital has the potential to bring benefits.

What do you need to do now?

Many accountants, tax practitioners and professional bodies have already responded to the consultation documents. At MHA, we will certainly be making our views known. However, you don’t have to be a firm of accountants to respond – the process is open to anyone who will be affected.

The consultation closes on 7th November, so if you would like to make your voice heard, please click here.

As more information becomes available, we will continue to develop our strategy for coping with the change and minimising the stress of changing to the new system for our clients (and ourselves!). We will provide you with regular updates, so watch this space.

If you would like any further information or advice, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, Tait Walker.

Making Tax Digital: Some Questions & Answers

HMRC’s vision of the future is that all dealings with tax payers and agents will be digital.

The proposals for the new digital world were introduced in the March 2015 Budget. Then, in August 2016, six consultation documents were published and the closing date for responses is 7th November 2016.

It is expected that there will be more detail in the Chancellor’s Autumn Statement and also in the Budget next year.

Here is a summary of what we know so far:

What is it?

Making tax digital is a complete change to the way businesses currently report their income and expenditure to HMRC.

Under the current system, businesses prepare one set of accounts and report the information on the annual tax return, so there is one submission of information to HMRC.

Under the new system, there will be quarterly reporting of profits and then a further annual declaration, making a minimum of five submissions to HMRC each year.

When does it start?

April 2018

It is possible that the smallest businesses will be able to defer until April 2019 – this is one of the topics covered in the consultation documents – but for most business and landlords the start will be April 2018.

Who will be affected?

Unincorporated businesses and landlords.

Quarterly reporting is not confined to businesses. Landlords will also be required to report quarterly if annual rents will be in excess of £10,000. This will apply even if your main source of income is a salary or a pension and the rental income is just an extra.

Limited companies will be included later – in April 2020.

What will you have to do?

Use software or apps to keep your business records and provide regular (at least quarterly) updates of information to HMRC. These updates will be a summary of income and expenditure only – each transaction will not be shown.

The proposed time limit for submission of each update is 1 month from the end of the period.

Is anyone exempt?

  • Those with turnover of under £10,000. Note that business turnover and rental income will be added together so if you have self employed earnings of £6,000 and rental income of £5,000, your total income will be £11,000 which is over the threshold and you will be required to report quarterly.
  • Charities.
  • Those who “cannot engage digitally”. This means people whose religious beliefs prevent them from using electronic communications and people for whom online filing is not reasonably practical for reasons of disability or age, for example.

Do we like it?

Making Tax Digital represents a seismic shift in how businesses and landlords record their financial transactions and interact with HMRC.

Where a person wants to stick with current methods, whether paper records or spreadsheets, the new regime will create an extra layer of work. However, where taxpayers and/or their accountants embrace new ways of working, and in particular digital record keeping and cloud accounting, Making Tax Digital has the potential to bring benefits.

What do you need to do now?

Many accountants, tax practitioners and professional bodies have already responded to the consultation documents. At MHA, we will certainly be making our views known. However, you don’t have to be a firm of accountants to respond – the process is open to anyone who will be affected.

The consultation closes on 7th November, so if you would like to make your voice heard, please click here.

As more information becomes available, we will continue to develop our strategy for coping with the change and minimising the stress of changing to the new system for our clients (and ourselves!). We will provide you with regular updates, so watch this space.

If you would like any further information or advice, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Digital Tax team.

This article originally appeared on the blog of our member firm, Tait Walker.