The way the UK tax system works undergoes a major change on April 1st, 2019. That’s when the government’s MTD ('Making Tax Digital') legislation becomes active.
So what exactly is MTD, what are the implications for expense management and how can you make sure your business is ready for the changeover?
These are the questions that Webexpenses will be helping to guide you through during the run-up to next year’s MTD deadline. We will provide expert advice and guidance on how to prepare for the changes.
What is MTD?
This is a government initiative to simplify and streamline the UK tax system. The general aim is to move from paper-based and manual ways of working, over to digital and automated processes.
The original plan was for the MTD changes to include income tax, VAT and corporation tax but, after consultation, the government decided to opt for a more phased approach.
Initially, this only applies to VAT. From April 1st, 2019, all VAT-registered businesses that are above the £85,000 tax threshold will need to keep digital records and submit VAT via compatible software.
The MTD Challenge
While the vast majority of companies submit VAT digitally, using the Government Gateway website, only 12 percent are currently using software to send that information across.
But the biggest MTD challenge is for those organisations who still use paper-based methods to manage and monitor costs. Expense management is one area where paper-based management is still commonplace.
A 2017 study, commissioned by Webexpenses, found that 62% of UK businesses are still using paper-based management methods to handle employee expenses.
And while the initial focus for the MTD legislation is VAT, the government intends to extend the same approach to all areas of tax administration. It means that paper-based expense systems are increasingly out-of-sync with the requirements of today’s legislative environment.
Making the Switch
The purpose of MTD is to move businesses to a more streamlined and efficient way of operating. This is exactly what’s delivered by switching to a digital expense management setup.
A cloud-based system, such as Webexpenses, uses a mobile app to convert paper receipts into a digital format, providing all the benefits of automated and paper-free expense management processes.
Over the coming months, Webexpenses will be providing guidance to help those organisations making the switch to digital before the MTD changeover. With knowledge and planning, it can be a smooth and stress-free process.
Our team will also be providing advice for businesses with digital setups but looking for advice on how information should be shared between systems to ensure MTD compliance.
This is an area where there’s still much uncertainty, with the UK Government not yet having provided comprehensive guidance on the software requirements.
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