What image does HMRC’s office conjure up to you? Do you see a drab and dreary office where the cracks of light are blocked out by sky-high paper towers of forms with hurried scrawling etched in desperation of making the latest deadline?
That is all changing! HMRC plan to become a ‘world leading digital tax authority’!
This is somewhat a contrast to their staid and bureaucratic approach that we have come to know and expect since they were founded in 2005. In fact, this shiny new initiative is just the latest step along the road to becoming a fully digital 21st century government department with digital income tax reporting being run out in April 2020.
It is somewhat ludicrous when you stop and consider that we live in an age where in a couple of clicks (even less with face ID) you and your business can bank from your phone, claim expenses through an app or even book and manage business trips at a glance; and yet this fast-paced business world we all play in can be brought to a thunderous halt as we stop and scale through those mountains of paperwork and crumpled receipts, scratching our heads at complex regulations just to file a VAT return.
What is the Making Tax Digital initiative?
As of Monday 1st April 2019, we became fully cemented into the digital era. VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 will now be required to use the Making Tax Digital service to keep records digitally and use competitive software to submit their VAT returns for VAT periods that started on or after 1st April 2019.
There is no doubt that stepping into this digital-first world will make managing business finances much more straightforward and streamlined. Research has highlighted that 16% of SME’s use a shoebox to store receipts and tax details, 23% use manual bookkeeping, and 27% use spreadsheet, whilst only a third use tax digital software. This will be changing the way that the cumbersome tax system as we know it works and in doing so, it becomes more efficient, more effective and, perhaps most importantly, more transparent.
Avoidable mistakes cost the Exchequer over £9billion every year. With the addition of the correct accounting software there will almost instantly be increased accuracy and accessibility which will not only eliminate this eye-watering total, but also reduce the risk of further (time and money) costly HMRC interventions; allowing businesses to fluently share these records with their third parties in real time without frantic searching for those lost receipts, handwritten errors or mistaken translations, and allowing you to do what you do best with your business.