Making Tax Digital: what does your service business need to know?

Making Tax Digital is a part of government plans to modernise the tax system to make it more effective, more efficient, and easier for customers to comply. Through this initiative, HMRC aims to become one of the most digitally advanced tax administrations in the world.

What does this mean for your service business?

As of April 1st 2019, all VAT registered businesses earning over £85,000 need to keep their records digitally, and submit online VAT returns on HMRC approved software. If you have a taxable turnover that is below this threshold, you can continue to use your current VAT process for now.

HMRC figures show that nearly 100,000 businesses have already signed up to the digital service, with over 4,000 businesses joining each day.

Is this a good thing?

Ultimately, Making Tax Digital will help businesses to get their tax correct.

But perhaps even more important, it will also streamline how you manage the tax process so you can be more efficient. For example, if a business currently uses more than one product to keep digital records, it will need to link them together digitally.

And, while there might be initial set up costs involved with this, we believe that there are many good reasons to make the switch from Excel. For example:

  • As an organisation grows, workflow can become uncontrollable in Excel, with data often found to be missing, out of date or incorrect
  • Sharing data via Excel can be a pain. Sure, you can create a shared folder which gives access to many different employees, but they can’t edit a spreadsheet simultaneously or easily recover deleted data. Also, it can be challenging to keep track of who has changed what and when. And, while using free cloud-based tools such as Google Spreadsheets could help you to get around this, in an era where stringent data protection is required, this could open your business to unnecessary risk.

However, by moving from Excel to cloud-based accounting software, your people will get the technology they need to work more efficiently, so your business becomes agiler and more competitive. And crucially, migrating to the cloud doesn’t have to cause any disruption to your business.

What does this mean for your accounts department?

If you are already using digital accounting software that’s great, but there still might be work to do. For example, you will need to ensure it is Making Tax Digital compatible. You can find out more about this here.

What if we have missed the deadline?

You don’t need to have signed-up from day one, but you do need to make sure you’re keeping your records digitally for your next VAT period which starts on or after 1 April.

Also, during the first year of Making Tax Digital, HMRC has said it will take a light touch approach to penalties where businesses are doing their best to comply. However, if you have not already switched over, now is the time to do so.

Make all your processes digital

At Service Geeni, our invoicing software already integrates with a range of compliant accounts packages. Find out more about our cloud-based invoicing software.

But more than this, in addition to Making Tax Digital we would encourage businesses across the UK to take all their operations online.

For example, when you combine our invoicing software and Mobile Worker app, timesheets and parts are automatically calculated against the job. Once done, this data is then shared with your existing accounts software. This digitalisation helps to streamline your entire business while keeping you compliant with the latest regulations.

For more information on how our service management software can help you, contact us today for an informal chat.