THERE are three kinds of businesses when it comes to preparing for HMRC’s Making Tax Digital (MTD) initiative, according to Liz Brewster, Client Project Manager at Elsby & Co and the Northamptonshire firm’s resident cloud accounting expert.
Liz explained: “Making Tax Digital – which requires all companies and landlords with a turnover above the VAT threshold of £85,000 to be using appropriate accounting software by April 2019 – has seen our clients falling into three broad categories: One Step, IT Project or MTD Ready.
“A recent example of the One Step model was a retail outlet we supported. The owner was hand writing everything into an accounts ledger at the end of each day, and then adding up the numbers himself.
“He recognised a need to act quickly ahead of MTD and decided to implement Xero accounting software in one step. After a few hours of training and with ongoing support he’s now entering his weekly sales into Xero, recording costs and reconciling bank statements monthly.
“The IT Project scenario has also emerged when a business is fairly organised, and possibly even uses software to help manage its finances. This makes it a simple procedure for us to connect their existing data to a modern cloud accounting system and then update their day-to-day procedures.
“Finally MTD Ready is the title we give to companies that have a solid grip on cloud accounting and are in the best position for MTD ahead of next year’s April deadline.
“It’s important to recognise that switching over to cloud accounting still requires a business to be organised and disciplined with their record keeping. Ultimately, it’s all about having a plan and being aware there are straightforward solutions to MTD.
“There are situations where MTD will have a more significant impact. Food outlets, for example, can deal in a lot of cash and if some money is spent to buy bread, then Saturday staff get paid from the till, it’s easy to lose track. MTD means recording daily sales in an accounting system.
“This is where we review what’s happening, set up new processes and help our clients implement a suitable accounting system to support their needs and become MTD compliant. Change is always challenging, but it’s important not to ignore what’s on the horizon.”
After VAT-registered organisations have complied with MTD there will be a phased timetable for other businesses to switchover, beginning in 2020.
Liz added: “There are 1.2m businesses which will need to be ready for MTD, but only 20 per cent are currently filing their VAT from a digital system. Elsby & Co is firmly behind the process of helping migrate businesses quickly and efficiently to meet MTD requirements.”
To register for Elsby & Co’s Cloud Accounting workshops in 2018, visit www.elsbyandco.co.uk and click on Events & Workshops, or call 01604 678470 for further details.