From April 2019, businesses with taxable turnover above the VAT registration threshold will be required to keep their records digitally and submit VAT returns using Making Tax Digital compatible software.
Businesses are already required to keep evidence of transactions such as copies of invoices, receipts and cash takings records as part of their existing record keeping obligations. As many agents tell us, if this is done manually, this paperwork can really build up and the impact on their workload can be huge when that paperwork arrives in the archetypal shoebox or carrier bag late in January!
You are also probably used to seeing some clients make avoidable errors due to the fact that they keep poor records. Supporting your clients to make the transition to using software and apps to keep records digitally, as they go along, can do all of the hard work to help avoid these basic errors. Some of these tools allow the scanning of receipts or automatically add income and expenses from the business bank account. Many have nudges built in to help eliminate common mistakes. As the income tax and VAT pilot’s progress, we will publish details of MTD compatible software on GOV.UK.
Under MTD, you will be able to link your clients’ records directly to your practice software using some of these tools, making it easier to access an accurate and up-to-date overview of the business when required. We are hearing from a number of agents who have already transitioned their clients to digital record keeping that this, in combination with time saved from correcting avoidable errors, is allowing them to spend more time on giving higher value advice to their clients.
We appreciate that some of your clients may find the process of moving to digital record keeping more difficult than others do, and becoming used to new processes can increase the workload for both the agent and the business in the short term. However small business owners who have made the change to digital record-keeping have commented it has enabled them to run their businesses more effectively.
If you use commercial practice software, you may want to speak to your provider to find out when it will be MTD compatible and which business record keeping tools will integrate with the software.