A large number of British businesses may be panicking over the prospect of Making Tax Digital, a survey suggests.??
The move means VAT-registered businesses with taxable turnover above the VAT threshold of ?85,000 must use the service to keep records digitally and have compatible software to submit VAT returns from 1 April.
It comes as data suggests that one third of small and medium-sized businesses still write down expenses and keep receipts in a bag.
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The most common way of managing finances for UK SME owners? is to manually write down expenses in a notepad and keep receipts in a bag, with one in three saying they do this.
But non-digital forms of data capture can lead to mistakes. The most common include submitting the wrong amount of taxable income, with nearly half having done this, losing paperwork (22 per cent) and incorrect expenses calculations (17 per cent).
According to more than a quarter of SMEs, digitisation has saved them time.?
Meanwhile, 22 per cent say it has saved them money and has encouraged entrepreneurism, helping trigger future start-ups.
Xero has been listed by the HMRC as compatible with Make Tax Digital for VAT.?
You can check which software packages are compatible with the initiative?here.?
The business will soon roll out the functionality but it has in the meantime launched a cartoon series, created by the Oscar-nominated artistic duo Alison Snowden and David Fine, which shows accountants and businesses how to switch to digital forms of record-keeping.
Making Tax Digital
According to the official government website:?
Making Tax Digital is a key part of the Government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world.?
Making Tax Digital is making fundamental changes to the way the tax system works ??transforming tax administration so that it is:
More effective, more efficient and easier for taxpayers to get their tax right.
VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.
After this date you will no longer be able to manually complete the nine boxes of a paper-based VAT return, or manually complete your VAT return online at the HMRC VAT portal.?
If you suspect your business will soon be within the VAT threshold, then you must start to keep VAT records digitally using a compatible software to ensure you don’t fall foul of the Making Tax Digital for VAT rules.??
A small minority of VAT-registered businesses have a deferred Making Tax Digital for VAT start date of October 2019.
You??e in the deferral group if your business:
is part of a VAT group or VAT Divisionis based overseasis a trustis a not for profit organisation that is not set up as a companysubmits annual returnsis a local authorityis a public corporationmakes payments on accountuses the VAT GIANT service
You can find more information on this here.