The forthcoming Making Tax Digital (MTD) initiative is the latest development to the self assessment tax system and represents a major change to the way in which tax is reported. Whilst this will ultimately impact on everyone, from businesses through to landlords and individuals, VAT registered businesses will be the first to be affected with an implementation date of April 2019.
One of the biggest challenges facing businesses will be making sure that their accounting records are maintained in a format that is compatible with the MTD system.
While all is not lost for those maintaining records on spreadsheets, converting these to a compatible format may be difficult and some form of software will be required to do this. Using accounting software to maintain records is a much better option.
Traditionally, software would have been purchased upfront, installed onto the hard drive of your computer and only accessible from that computer. It would have been necessary to create backups, install updates and, from time to time, purchase a newer version as older versions became obsolete.
Accounting software has however moved on with “cloud accounting” becoming increasingly popular. Put simply, cloud accounting is a means of accessing accounting software via the internet rather than the hard drive of your computer. The data is stored on a remote server in “the cloud” and updates are dealt with by the provider. Payment is usually via monthly subscription.
There are many providers and accounting packages can range from simple systems suited to small businesses through to systems offering more in depth analytical and reporting options or systems that are tailored specifically to businesses operating in certain sectors.
In addition to assisting with MTD compliance, the use of cloud accounting can bring significant advantages to your business. These include ease of access (anywhere there is an internet connection), automatic upgrades, the ability to email invoices on the go, access to live “real time” data by your accountant and real time financial reporting.
Real time financial reporting can assist greatly in areas such as monitoring cash flow, credit control and profitability but also provides a much more timely and accurate basis for financial and tax planning, enabling issues and opportunities to be identified and addressed at an earlier stage. You may be surprised by the benefits!
Rennie Welch LLP accepts no liability on the basis of this article and professional advice should always be sought based on specific circumstances. For advice or assistance please contact Lynn Miller at Rennie Welch LLP either by email at email@example.com or by telephone on 01573 224391.
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