It already permeates most aspects of our everyday life, and the digital world is soon to take over our tax affairs too – making tax digital is the latest Government initiative set to transform the way businesses manage their finances.
With the aim to simplify the tax process, and make it easier to file, pay and update your taxes online, it could have a significant impact on how your business conducts its tax affairs. So, who stands to benefit? And, what does a digital system really involve?
VAT and banking accuracy:
Tax mistakes are common when filing lengthy and complex returns…and they’re mistakes that could prove costly should HMRC find cause to investigate. Making tax digital will give you complete and instant access to all your tax data, increasing the accuracy of your tax affairs. It also enables you to manage your tax exemptions and allowances easily online, from capital allowances to R&D tax relief.
It can come as a shock when you get stung by a tax bill each year that isn’t quite what you expected. Digital tax should take care of this. Online record keeping and quarterly updates will reduce error and keep you in the know of your tax position throughout the year; it means you’ll be able to forecast more accurately without any nasty shocks or surprise accrual of repayments building up.
Providing regular tax data throughout the year might at first sound like more work, but it’s in fact designed to improve efficiency – the idea being that the better and more frequent the interactions, the less the backlog to wade through come January…and the less the pressure of a mounting tax bill to be dealt with, all in one go.
Both for your business and HMRC. Not only should errors be reduced through more consistent access to information, but you’ll instantly be able to see all your tax information in one place – including liabilities, previous returns, exemptions and entitlements. The risk of missing out on any tax allowances that your business could be entitled to will be reduced.
No more tedious forms!
Or, at least, less. When tax goes digital, a centralised system should mean there are less forms to fill out on a regular basis, without the need to repeat information to HMRC. And because the system will function in real-time, details and calculations can be easily stored and updated, and consistently kept up-to-date.
Going digital doesn’t have to involve a dramatic change to your current tax processes – while handwritten bookkeeping and paper records will be a thing of the past, 99% of VAT returns are currently submitted online* and many businesses already use apps to manage their finances and record expenses. HMRC have promised to provide free software for businesses once tax is made digital, or you can use an independent accounting software package, such as Xero.
Of course, while many businesses stand to benefit from using a fully digital tax system, the level of its success remains to be seen. While an automated system has the potential to make dealing with your tax affairs simpler, clearer and easier, it doesn’t discount the importance of professional, expert advice when managing your finances.
If you have any questions regarding making tax digital and would like to speak to a member of our team on a no-obligation basis, just get in touch, we’d be happy to help.