MTD - A Hidden Benefit?

So you’ve ensured you are compliant for “MTD” and all that Making Tax Digital has required you to do. That may have been moving your records to digital or more simply ensuring your records are kept up to date and recording greater detail in your accountancy software, or even migrating to a new accounting software provider such as Sage 50cloud Accounts.

You’ve done all that work and maintain everything and the house is in good order, so what next...

 First, I would like to ask the reader a question?

  Q: Was all that work just for HMRC’s benefit?

Well, whether you are an Accountant in Practice or the business owner/manager, the value of the data which you now have is extremely powerful.

Spending time getting your data organised is great but imagine now that this could lead to improved growth, more opportunities and having a more thorough understanding of your business performance.

Ultimately HMRC has helped, however, the next step is to embrace the opportunity and be prepared to grow your business or if you are in Practice, help advise your clients on growth, perhaps being fully armed with all the facts for the very first time.

 With Cascade50 you can very quickly and easily harness the power of your Sage 50cloud data via our seamless link providing cloud-based reporting, meaning you can access all of the information you require from anywhere in the world. (via any browser-enabled device). The vibrant dashboards and analytics allow the user to easily identify trends and drill into the detail, using data to make a more informed business decision.

It is not just for the business owner either….becoming an Advisor who adds value to your clients.

 As we move towards 2020, three major changes are coming. April 2020 will mark the end of HMRC's ‘soft-landing’.

 The 3 key changes are that thousands of small businesses will be required to keep their records digitally as the second phase of MTD commences.

 The first and biggest change affects hundreds of thousands of small businesses that keep their records in summary Excel or on paper. The 2020 changes require these entities to digitalise the recording of supplies received and made, including the time of supply, the value and the relevant VAT percentage. This includes sales, purchases, stocks and fixed asset transactions. This will likely lead to the small business purchasing a bookkeeping software package like Sage for the very first time. This software should be MTD compliant for filing returns. Companies may continue to use bridging software for MTD to maintain their data if it is able to transfer the data to HMRC without any manual adjustments or intervention.

 The second change will impact most large to enterprise-sized businesses. From 1st April 2020, the transfer of data between functional compatible software (invoice and accounting systems etc.) must be done using digital links. This means there will be no manual inputting, including manipulation, consolidation or error corrections able to be made in spreadsheets. This includes the end of the ‘cut and paste’ concession allowed during the ‘soft-landing’ phase.

The third change is that penalties will kick in for the first time. The penalty system has previously been suspended during the ‘soft-landing’ phase, however, cumulative penalties will commence based on the number of offences in the past 12 months. This can reach 15% of the VAT due, in addition to fines of up to 100% of undeclared VAT as a result of deliberate or careless inaccuracies.

About the author:

Mark Donaldson has been working with SMEs for over 18 years. A qualified Chartered Accountant in practice, having completed his training with Larking Gowen, he moved to Grant Thornton working in both audit and consultancy services, before leaving in 2009 to set up his own FD consultancy.

Mark has been the FD of a manufacturing business; CFO for biotech, healthcare and life sciences companies; and led a number of bespoke data reporting implementation projects for SMEs.