If you are like most people, you have probably already heard about Making Tax Digital and how actively the government is trying to implement the new system. With the new system, the government aims to revolutionise entire industries by changing the way in which reporting and taxation works in the UK. With Making Tax Digital, it is expected that in addition to changes in the relationships between tax agents and clients, the entire taxation process will also change.
Making Tax Digital is important for several reasons. The primary reason why Making Tax Digital is so important is because the new system will allow automation and transparency in the taxation process. What’s more, since all reporting will directly be done online, businesses will always have quick access to previous details, data, and information which is often needed during taxation and other financial processes.
As with every new system, Making Tax Digital also has certain software requirements for seamless integration and implementation. The software requirements of the new system are there to ensure that all businesses and firms can report their financial and tax information without any problems. Read on to find out which type of software is required for Making Tax Digital.
Businesses with digital accounting records
Most companies and businesses in the UK have had digital accounting records for several years before the idea of Making Tax Digital was even introduced to the public. The move to Making Tax Digital for the businesses and firms which are already using software for their accounting will be quite easy. The government has already listed recommended software for digital record keeping in order to ensure that business owners in the UK are not coaxed into buying software which isn’t required.
For the businesses which already use software for their bookkeeping, the shift to software which is compatible with Making Tax Digital can easily be done by software vendors who have constantly been in touch with the HMRC. These software vendors fully understand the requirements of Making Tax Digital and will be able to propose the best and most efficient solutions for businesses which already use software and have digital accounting records.
Since the complete implementation of the new system is likely to take a few months, large businesses can be expected to be a part of Making Tax Digital during the final phases of its implementation. Additionally, all businesses will be required to report their returns quarterly instead of once a year. It is also required that the software being used must have security features, along with the ability to manage new VAT schemes.
Businesses without software-based accounting
Even though the numbers are negligent in comparison to their digital counterparts, there are still several thousands of businesses in the UK which do not make use of accounting software to keep records. As an incentive for these businesses, HMRC will most likely make free software available for these businesses to digitalize all of their accounting processes. What’s more, these types of free software will also be updated automatically in order to ensure that there are no problems with the implementation of the new system.
Being the favorite types of applications of accountants across the globe, countless bookkeepers throughout the UK were concerned about how the new system will affect the use of spreadsheets. Fortunately for many, it has been confirmed by the government that businesses will still be allowed to use spreadsheet applications for managing and organizing their data.
There is, however, one simple requirement: the spreadsheet applications being used by businesses need to be in line with the requirements of Making Tax Digital. This means that the spreadsheets being used by businesses need to have features which can make the implementation of Making Tax Digital simpler. One example of the features which need to be included in the spreadsheets or software being used by businesses is that they should have an option of quarterly reporting to the HMRC.
For the latest on Making Tax Digital, or to shift your accounting to an online platform, head over to Capium today!