What are the long term benefits of Making Tax Digital?30 Jul 2019
As is often the case with modernisation, some sections of business have voiced concerns that Making Tax Digital (MTD) is an unnecessary additional reporting requirement and will only add to tax return-induced stress.
These concerns ignore the reality that the changes are reflective of the unavoidable global digitisation of business, which, in turn, offers significant and unique opportunities for a modern business to drive a change in how they work and use data.
Our team of accountants are advocates for the use of technology in accounting and since our inception in 2013 we have been harnessing the power of cloud software to help drive our clients forward at a faster rate than their competitors.
As Making Tax Digital becomes a countrywide necessity for all UK businesses, the technology help business owners master is this same technology that will be used for compliance with HMRC’s new digital system.
While we acknowledge that migrating a business’ accounts from its existing paper or excel system to a new cloud one does take time and expert training, it is vital to keep an eye on the long term benefits this new software can create businesses, too.
Digitisation of tax and its authorities
The attempt to stigmatise Making Tax Digital as an unfair and unnecessary system conveniently overlooks the fact it’s by no means the first such undertaking of its nature in the world.
There has been a significant trend for tax authorities to move towards real-time or near real-time data submissions with increased requirements for more detailed data submissions to support traditional returns.
For example, Brazil has continued to increase the level of regular data submissions a company must make – a move reflected by the likes of Poland, Bulgaria and Romania.
The message is clear, the shift towards digitisation across the global tax spectrum is well underway and Making Tax Digital is just adjusting to that general shift.
This is part of a deliberate move to digitise taxpayers in an attempt to minimise the part of the economy which operates on a cash-only basis.
Obviously, this needs to be simple and cost effective for the taxpayer, but this effort to create more transparency is a long-term trend.
Making Tax Digital software
This wider trend also need not be dreaded by business owners.
Instead, they should embrace it as the massive opportunity it is to capture change in the way they access and use their data, with limitless opportunities offered from automated processes, proactive risk management, intuitive data analytics, real-time analysis and reaction capability.
This can lead to opportunities to increase efficiency, standardise processes and reduce risk.
In the short term, new technologies can function as centrally and critically involved with day-to-day business decision-drivers.
Luckily, these changing requirements and opportunities come at a time of significant and sustained improvements in the capabilities of technology.
Not a week goes by without an article on “automation” and “cloud computing” in the press, but the reality is that technology has been evolving at a similar pace for decades – it’s just not impacted the world of tax until recently.
The previous two decades have seen huge progress and increase in computing capacity and technology. This has been matched by as significant a change in how society interacts with technology - a hat tip to the omnipresence of smart phones and Wi-Fi connectivity.
At the same time, we have also witnessed a change in how technology is integrated, which has led to it becoming far more intuitive and accessible to “non-IT” people. This means there is a real opportunity to use technology to meet these ever-increasing tax compliance requirements in a way that wasn’t available before.
Take the leading cloud accounting software, Xero, for example.
Xero automates and streamlines the accounting process, while returning data and insights that can add true value to a business’ operations.
Furthermore, Xero’s slick, intuitive dashboard feature puts business owners firmly in the driver’s seat.
It gives you a live view of your bank balance, cash in and out and all your outstanding bills and invoices as they stand in that very moment.
Whether you want to send an invoice, update your receipts and bills folder, or get a look at a current financial statement, Xero ticks all the boxes.
With Xero, you can process an invoice, email it straight to the customer and sit back and watch as the transaction is filed straight into your books.
Moving to Xero has the potential to revolutionise the efficiency of your company, while also acting as your business’ software solution for Making Tax Digital.
Need to get your business ready for Making Tax Digital? Our team are certified to help make the process a smooth one and get the very best from your new software.
Get in touch to further discuss how our expertise can get help your business realise its full potential.