Skip To The Main Content
25 January 2019

Don't fear Making Tax Digital, say accountancy firm

From April 2019, businesses above the VAT threshold of £85,000 will need to keep digital records of all their transactions and file VAT returns using commercial accounting software.

Making Tax Digital means a big change in the way many small businesses do their books - moving away from paper-based accountancy and an end to typing VAT return figures manually into the government's Gateway website.

While concerns have been raised about awareness of the change and the cost of buying compatible software, the message to small businesses from FSB members Harlands Accountants, in County Durham, is that, ultimately, it can save time and benefit your business.

Accountants Jaclyn Warwick and Laura Tweddle are on the firm's Making Tax Digital working group, which aims to move all of its clients off paper-based accountancy methods by April.

The firm has a wide range of clients, ranging from sole traders and partnerships they have looked after for years to emerging businesses and limited companies, lots of whom will be affected by the change.

Just over 80% of clients that Harlands completes VAT returns for are ready for MTD. But some believed its introduction would be pushed back, or not affect them at all, and are still using an old desktop accountancy system.    

Since businesses started receiving notifications from HMRC about Making Tax Digital, or seeing TV and radio advertisements, more people have been contacting Harlands about what they need to do to be ready.

Laura says: "For a lot of clients, we didn't have to do anything but some thought it was never going to come. We are now stressing to them: It's now happening and it's happening in April, so you have to do something."

The firm has been offering training on software. Jaclyn says the feedback they have had has been very positive: "They are always saying: 'Why haven't I done this sooner? I didn't realise it was going to be this easy."

They say Cloud-based software, such as that offered by Xero, Quickbooks and Sage, is improving all the time with new apps and add-ons designed to make things easier.

While its cost will vary depending on your business and will inevitably be frustrating for those who have previously invested in an in-house system which will not be compliant  - more straightforward firms will be able to run a subscription for as little as £10 a month, says Jaclyn.

Small business owners who currently spend days uploading their VAT information at the end of each quarter will be able to get a better handle on their finances and a clearer picture of VAT that will be due, once they make the switch, she says.

"It should definitely save  them time. I think running a business is stressful enough at the best of times, without having to come home and sit down and start reconciling your books," she said.

She used the example of someone making a large purchase of stock for resale. Using the new software, they can take a photo of the receipt and upload it directly to the accountancy software, rather than having to type it in manually or write it into a paper file.

"It may be three clicks of a button and it is on your software - what you purchased and your VAT liability. It's moving towards a seamless process of buying and selling. Everything will reconcile itself on the accountancy software, rather than the client sitting at home and working out what incomings and outgoings going to be," says Jaclyn.

"I don't believe in waiting until the last minute to do tax and VAT returns. There's no point in dealing with things that happened three months ago. If we can invest more time in making more of our clients deal with things in a real-time manner, we can help and advise them in dealing with the future, rather than dealing with things past."

She said it was a good opportunity for people to review the way they manage their accounts and internal practices, to break bad habits and "finally make changes they have been putting off". Once they have real-time information they will have a better handle on how their business is performing and will be able to plan better for the future.

She uses the example of a client who runs an emerging start-up business, who was able to do his books on a transatlantic flight: "Due to the fact that his flight had wifi, he was sat with a gin and tonic on a tray table, doing his accounts on Xero. That's how easy it's going to be.

"You don't need to be sat on a laptop with realms of paper and receipts in front of you. If you can get into good habits, taking photos of receipts and uploading them, people who embrace this will reap the rewards."

Laura says that changing your accounting habits may seem daunting but accountancy firms can help with training and guidance: "You have to embrace the change. Don't be afraid of it because if people do it properly and adopt it correctly, it can only be a good thing."

For more information and guidance on Making Tax Digital visit our dedicated Making Tax Digital Hub. 

See how FSB have campaigned on this issue