The race is on to Make Tax Digital (MTD) for VAT; the legislation which will require all VAT registered businesses across the UK (except where an exemption is in place) to digitise their VAT accounting records by April 1 of this year. While understandably a daunting thought for many, the reality will save companies a huge amount of time, energy and money, and allow management to turn their attention to other aspirations.
We have previously seen VAT registered businesses with a taxable turnover of over £85,000 called to comply with the new rules, and have witnessed great successes for those which have fully embraced the change. Now, with a number of smaller organisations approaching the MTD deadline, it is paramount that people are motivated by the opportunity, rather than the threat of a potential penalty.
Speaking to clients across a variety of sectors, it is clear that every company is on their very own digital journey. Some are taking their first steps into becoming more tech-focused, while others have already embraced the likes of artificial intelligence and robotics. For this reason, it may be helpful for readers to consider the digital journey of MTD as being similar to that of a train journey.
Many of our clients are used to manually recording expenses or using spreadsheets to track their accounting. In comparison, buying physical train tickets can be a time-consuming task, and there is that added worry of misplacing the physical copy. There are also sometimes queues, delays, and the chance you might miss the train altogether when dealing with such outdated systems. However, buying your train ticket digitally can be much less stressful, freeing you up time in the process, and it is also much less likely you will lose the digital copy.
Similarly, accounting online is more efficient in the long run, and will allow near real-time reporting, which will reduce the risk of missing HMRC’s deadlines. Time spent toiling over books can be better spent refining other areas of your business and ensuring that your staff, stakeholders and customer base have more time dedicated to them. Making Tax Digital can release the full potential of organisations and allow leaders to fulfil other goals too. The digital journey can begin, and there are a variety of destinations to explore from there.
It is clear that the pandemic has fast-tracked digitisation at many companies. Organisations which were able to offer services online during the last two years were particularly successful and this will be true going forward too. We are already seeing the regular incorporation of AI into day-to-day life, which, in my line of work, will allow for increased innovation and intelligence, which can be shared with our clients. Like all technology, early adopters will benefit from these efficiency gains to grow their customer base and their business, which is often the goal of our clients.
However, we also speak to those looking to exit, which may make MTD feel like unnecessary stress. I am of the view that Making Tax Digital will actually prove to be appealing to potential investors, who hope to work with a forward-thinking and tech-savvy organisation. To get maximum value from your company, having these processes in place will only look more attractive to others, regardless of the direction you hope to take the organisation.
MTD can future-proof your business in other ways, too. Those able to operate online benefitted most during the pandemic, as they were able to work remotely, offer their services in new ways and adapt to unforeseen circumstances. In a world that is more and more digital, it makes sense to move accounting online too.
Making Tax Digital for VAT will become mandatory as of April 2022, with other tax services following suit in 2024 (Income Tax) and 2026 (Corporate Tax), but it can be much more than a tick-box exercise. Trusted advisers can support businesses on their digital journey, training clients on how to use the new software and how to get the most out of the information available. We can spend time with those at the forefront, to understand their business beyond numbers and support their vision for the future. Amidst concerns of the continued impact of coronavirus, geopolitical conflicts and Brexit, staying ahead of the curve will allow entrepreneurs to prepare for the unknown and boost their digital confidence.