The new Making Tax Digital (MTD) system is a hot topic on every business owner’s agenda at the moment. However, as with every new system there are bound to be some misconceptions or fake news about the details. Never fear, Mazuma mythbusters are here to help separate the nonsense from the news.
Myth: Making Tax Digital isn’t happening
Oh yes it is… We know that the initial roll out plan for Making Tax Digital has been changed but many people think that as a result it isn’t happening at all. In actual fact, the MTD roll out has already begun, with businesses who have income above the VAT threshold already being required to use the new system (as of April 2019). If that doesn’t apply to you, it doesn’t mean your time isn’t coming! It is anticipated that the new system will be used by other businesses too after April 2021.
Myth: Digital accounting software is no match for my spreadsheets
Many businesses have tried and tested spreadsheets set up for their business accounting needs, but using accounting software can actually be much easier – you can trust us on this one! Even the best spreadsheets can be subject to errors in calculations and figures, and going forward HMRC will require you to use MTD compliant software. Switching to using software specially designed for the task means no more time devoted to creating spreadsheet functions that could easily be entered with a small error. A small error in a spreadsheet calculation can lead to a big error in your financial calculations and an even bigger problem in your tax account. With accounting software, you can rest assured that the only accuracy you have to concern yourself with is the actual input figures – which is much easier to get right!
Myth: HMRC are going to provide free software themselves
Unfortunately, HMRC will not themselves be providing free software for the digital switch. If you’re not sure whether your current software is compatible with the new system, or want to see what the software options are you can take a look on the HMRC website. However, if you’re already part of the Mazuma gang, you can rest assured that we already use MTD compatible software so you won’t have to make any changes at all. If you’re not already working with us, get in touch today to see how we can help you become compliant with MTD.
Myth: Making Tax Digital means I can’t use spreadsheets
If you don’t fancy the idea of losing your trusty spreadsheets all together there is actually an option for you too! Businesses can continue to use spreadsheets for their accounts, and there are no plans in place to remove this option. If you would prefer to stick to the trusty spreadsheet all you need to do is using bridging software to submit your data to the MTD system.
Myth: Small businesses should completely ignore Making Tax Digital
Whilst currently only large VAT registered businesses are required to use the Making Tax Digital that doesn’t mean everyone else can bury their head in the sand. MTD will be rolled out across other areas of tax reporting in the future. The timeline for this has changed but it is likely that most businesses will need to use the MTD system after 2021.
Myth: Making Tax Digital means keeping more records
Contrary to popular belief HMRC aren’t actually instigating Making Tax Digital to get more information from you. The main purpose of the new system is to help businesses to submit accurate tax returns as figures show that there are a lot of accuracy errors in tax returns. When a business transfers figures from one place to another there is an increase of opportunities for the numbers to go astray – MTD cuts out the transfer process, allowing the figures from your accounts to be directly submitted to HMRC.
Myth: I have to deal with Making Tax Digital on my own
If all the information about MTD is making your head spin then don’t panic! Mazuma can help you get our business ready for the change. That means one less stress for you to deal with! If you’d like to hear more about what we offer you can get in touch via phone 0333 0143369 or head contact us for a free, no obligation quote.