Meeting the challenges of Making Tax Digital in the UK
The Making Tax Digital (MTD) legislation in the United Kingdom goes live on April 1st, 2019.
It represents a significant shift in the way the UK tax system works – a new way of keeping business records and submitting digital VAT returns. But after years of discussion, delays and debate, it remains the cause of considerable uncertainty and confusion.
Does it apply to your business?
What exactly are the changes?
How do we remain compliant?
This guide aims to provide answers to these questions and to explore how Webexpenses’ suite of digital services can help to fully future-proof a businesses for MTD of VAT…and beyond.
What is Making Tax Digital (MTD)?
The legislation changes the way that tax related information can be stored and submitted to HMRC (HM Revenue & Customs). It’s part of a wider UK Government strategy to simplify and streamline the tax system.
The overall aim is to move from outdated paper-based and manual forms of accounting, to more efficient automated digital processes.
Initially, MTD applies only to VAT.
From April 1st, 2019, VAT registered businesses with a turnover above the £85,000 threshold are required to keep their records digitally and submit VAT information via compatible MTD software.
It means that traditional methods, with finance professionals manually inputting data, are no longer HMRC compliant.
It’s important to also recognise that while MTD initially applies only to VAT, this is only the start of an ongoing process to roll these changes out across the tax system.
What are the practical implications?
VAT must now be submitted to HMRC using an automated process and via a compatible software system. The key criteria is that your business is able to:
- Record and store VAT records in a digital form
- Submit VAT returns via HMRC’s online portal
- Receive digital data and information from HMRC
Companies are required to sign-up for MTD at least seven days before they’re required to submit a VAT return.
How do you create a compliant system?
The purpose of MTD is to move businesses away from manual and paper-based ways of managing financial information. The reason for this is to create a simpler and more streamlined tax system, one which benefits from the advantages of real-time data and automated processes.
A recent YouGov survey found 61 percent of businesses have reported losing receipts required to prove expenditures. Manual processes also create human errors as information is input and calculated.
So an MTD compliant operation removes any reliance on paper-based or manual processes – it creates a digital environment in which financial data can be easily managed and seamlessly moved between different processes and packages.
It’s a task that Webexpenses has been helping businesses to achieve for the past two decades. Starting with its award-winning expense management solution, the system now includes a whole range of powerful digital tools.
Webexpenses Expense Management
A cloud-based expense management system, Webexpenses removes the need to process paper receipts. A smartphone app with OCR scanning allows employees to instantly convert a receipt into a digital format.
The digital copy of a receipt complies with all of the requirements of MTD. It allows expense information to be handled via a completely digital process, with finance teams not having to manually input or transfer data.
Webexpenses Invoice Processing
This brings all of the benefits of paperless working and automated processes to invoice management. It allows a paper invoice to be converted into a digital format with relevant information automatically extracted using smart scanning.
The data can easily be shared with other accounting packages, creating a system that fully complies with the MTD requirements on the management of business records.
A simple and easy way to manage business travel, this provides finance teams with real-time data on all business travel costs within an organisation. With an accurate digital history, travel expenses can be easily shared with MTD compatible accounting packages.
This creates a simple and easy digital process for employee expense reimbursements. Using smart blockchain technology allows payments to be made from any of the main accounting software packages, including Quickbooks, Xero and Netsuite.
You can maximise the VAT reclaim benefits and minimise the compliance risks by taking advantage of this expense report audit service. This ensures that all legitimate VAT reclaims are identified and creates a systematic approach to MTD compliant document archiving.
Future-proofing your finance tools
It’s by combining all of these tools together that a business can create an accounting system that’s future-proofed to handle MTD. It removes the reliance on paper and manual handling of information and allows a connected, automated process.
While the MTD legislation initially applies only to VAT, this is only the start of HMRC’s push towards digital ways of working. And irrespective of tax laws, these are changes that all businesses need to be embracing in 2019.
The move away from traditional paper-based accounting can seem daunting but it has become a necessity in an increasingly digitally connected business and administrative landscape. For more information on making the switch, and to find out how we can help you, you can get in contact with one of our specialists here.