Myers Clark s Guide To Cloud Accounting & Making Tax Digital

Transcription

1 Myers Clark s Guide To Cloud Accounting & Making Tax Digital

2 Making Tax Digital - What is it? April 2019 A Useful Flowchart Making Tax Digital (MTD) is a government initaitive aimed to make it easier for you to manage and pay your taxes. From April 2019, businesses will be mandated to use the Making Tax Digital system for VAT obligations. Has the VAT Registered business had a turnover of more than 85,000 in the last 12 months on a rolling 12 month period? 2015 Budget had announced a path for digitising taxation in the UK. There were delays but in July 2017, dates were confirmed. VAT registered businesses are to be affected from April The date for all other businesses including Landlords will be announced in due course. The reason behind Making Tax Digital is that HMRC wants to modernise the current tax system to close the tax gap. HMRC believe that by keeping digital records, errors will reduce. As a minimum you will complete a quarterly return, plus a 5th one with any adjustments. A sixth one will eventually replace the current tax return. Cloud Accounting and the use of technology will make the process easier. Provide VAT information via MTD compatible software. VAT Returns are to be filed directly from software or API spreadsheets. Filing of VAT Returns will no longer be possible under the exisiting Government Gateway Portal. A new electronic account will be set up for all businesses. VAT registered businesses with turnover of less than 85,000 are automatically exempt. YES Are there any exemptions available for: Religious reasons Insolvency. procedures. Disability. Remoteness of location. NO MTD for VAT applies. YES YES NO NO Business is exempt Unless they have made an election not to be exempt. MTD for VAT does not apply.

3 Penalties The Process The Four Foundations of Making Tax Digital HMRC has confirmed that the penalties for failure to keep digital records will come into force immediately from April Penalties for late filing will come into force in April Two charge model will work as follows: If a payment or Time to Pay arrangement (TTP) is made or treated as made within 15 days of the due date, no penalty will be charged. Between 16 and 30 days half a penalty will be charged. After 30 days a full penalty will be charged plus a further penalty which will then accrue daily until payment is made or a TTP is treated as made. Penalty rates are yet to be advised. HMRC s View: will calculate and prepare the VAT Return from your digital records. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that is has been received. 78% OF UK SMEs ARE ALREADY USING 2+ CLOUD BASED SYSTEMS Utilised information - Businesses will not have to provide HMRC with information they already acquire, or with information they can obtain from elsewhere, such as banks and building societies. Furthermore, digital accounts will allow individuals to view information that HMRC retains at any time. Tax in real time - To alleviate errors, HMRC will collect and process information that affects tax as close to real time as possible, allowing individuals to know how much tax they need to pay. A single financial account - All businesses and individuals will be able to view in their digital account a broad financial picture, emulating the method of online banking. Digital interaction - Interaction with HMRC by customers and their agents will be able to occur at a time that suits them. The digital account they already possess will present to them an increasingly individualised overview of their tax affairs, as well as advice and support through secure messaging.

4 Why Cloud Accounting? What Are Apps? It complies with Making Tax Digital. It enhances a collaborative approach. Allows for mobile accounting. Allows you to spend less time inputting data. It has real time links with banks. Interfaces with lots of apps. There is no need for back ups. It is always up to date - more security. What Are The Options? Apps are additional programs which can be used with cloud computing software. They are generally used to reduce the amout of manual data entry. They are easy to use. They are easy to set up. They usually have a monthly contract so there is no commitment. There is no hardware required as they are all browser based. App Ecosystem Sage: - The UK s favourite software. - Has a new cloud version now available. - Links with apps hour support. Xero: - Links with apps. - Widely used. - Support via webchat. QuickBooks: - More secure bank feeds directly from the banks rather than screen scrape through Yodlee. - Better customisable reporting. - Excellent CIS module. - Good UK support - they can take over your screen. - Fewer apps but more robust links. - More developers than anyone else. Stock Management EPOS Accounting Invoice Reading CRM

5 Beyond 2019 Your Next Steps What If I Do Nothing? What Do You Do Now? Every business and landlord will use the income and expense category specified by HMRC, and will use the Electronic Account to submit data. HMRC will phase out the current portal for all taxes. Four quarterly returns is expected and a fifth one with any adjustments. A final one replacing the tax returns called year-end declaration. This may come with pre populated data that HMRC will have already. At the moment, the focus is on businesses, and exact details will not be confirmed until secondary legislation for other taxes is passed. Evaluate your current bookkeeping system to see what changes will be needed. Discuss your findings with us. Decide what new system (if any) is needed to ensure you are compliant with the new law. Implement and test your new system with plenty of time before April % OF COMPANIES WILL MOVE THEIR ACCOUNTING TO THE CLOUD All software houses want to transition to subscription based services. Sage clients who bought a perpetual licence will be moved to a licence model when they seek to upgrade to newer software. Sage are updating their interfaces continuously to drive clients to subscription model. QuickBooks have moved to a subscription model for Quickbooks Desktop. MTD will be starting next year and it will only be possible to file from up to date products. Speak to us to discuss your options and to help you choose which product is right for you. Contact our cloud specialists on or Priya Raja Motala: PriyaR@myersclark.co.uk Or Suzanne Daly: Suzanne.Daly@myersclark.co.uk

6 Contact us. Myers Clark, Egale 1, 80 St Albans Road, Watford, WD17 1DL