Getting ready for the extension of Making Tax Digital

.Are you ready for the extension to Making Tax Digital? If you’re VAT-registered, or submit a self-assessment income tax return, its time to start preparing.

Keeping the UK’s tax system running effectively, and up to date, with advances in technology is no easy task. The introduction of the Government’s ‘Making Tax Digital (MTD)’ initiative is intended to solve this problem, by moving most taxation over to a digital model.

Making Tax Digital for VAT began in April 2019.  It made it compulsory for VAT-registered companies that met the £85k turnover registration threshold to comply with the MTD rules. But the MTD initiative will soon be extended to cover ALL VAT-registered businesses. This will then be followed by all sole traders and property owners who submit a self-assessment income tax return.

So, what will this extension of MTD mean for you and your taxes? We’ve summarised the key impacts and what you need to do to stay compliant with the MTD guidelines.

What does the extension of Making Tax Digital mean for you?

The Making Tax Digital system is already up and running for many VAT-registered businesses. But the extension of the initiative over the next two years is likely to bring a lot more UK businesses and individuals within the scope of MTD – and that means you need to be ready.

We’ve aimed to answer some of the key questions for you below:

  • How does Making Tax Digital (MTD) work? In essence, MTD moves the recording of tax records and submission of tax returns away from paper and online returns, over to a digital model. Businesses and individual taxpayers will need to keep digital records of their finances. They will then submit quarterly returns in a digital format, direct to HMRC.
  • Who will be affected by the extension of MTD? The extension of the MTD initiative means that more businesses and individuals will now have to comply with the mandatory need for digital returns. According to the latest government briefing, this will mean:
    • From April 2022: MTD will become compulsory for ALL VAT-registered business, including those below the £85k turnover threshold.
    • From April 2023: MTD will become compulsory for all taxpayers who file income tax self-assessments returns for business or who have property income of more than £10,000 a year.
  • What do you need to do? If you fall into either (or both) of the two affected categories, it’s prudent to start planning for the MTD extension as soon as possible. This means that businesses and individuals must:
    • Keep digital records of their finances, along with all the relevant tax records
    • Use a relevant accounting software that can connect to HMRC’s digital portal
    • Submit a digital tax return on a quarterly basis, directly to the HMRC portal.

Setting up a digital accounting system for your finances

Getting your accounting system ready for MTD will help to iron out many of the potential pitfalls. For businesses that are operating in the digital domain, the whole process of submitting your VAT and self-assessment income tax returns becomes far easier to action.

If you’re using a cloud accounting platform, such as Xero, Quickbooks or Sage, then you’re already primed and ready for MTD. If not, now’s the perfect time to switch from a paper-based system, or a desktop accounting set-up, over to the multiple benefits of cloud accounting.

At Normans Ltd  we will help you with the planning that’s needed for MTD compliance. We will make sure your digital accounting system is fit for purpose and ready to submit returns.

If you want to discuss how this affects you and your business, call Rob on 01922 456105.

 

Choosing the right apps for your business

Software technology has evolved massively in the past decade.  Cloud-based apps are now fundamental to many processes in your business. To ensure you’re getting the best from the available tech, it’s important to choose the right apps and to create the ideal ‘app stack’ for your business.

But how do you know if the latest ‘must-have app’ is really going to be an asset or just an additional software cost? The Xero app store is a good place to start so that your apps integrate with your accounting system.

Building the perfect app stack.

Before you dive headfirst into the Xero app store, do your homework and give yourself some firm foundations on which to base your app purchase decisions.

  • Decide on the main aims of your software systems.

    Look at the specific aims of the business and tie each app into the various operations within your business model.

  • Make sure your apps integrate with Xero.

    Xero’s open API (application programming interface) allows all the apps in the app store to connect directly with Xero. This means that data and financial information can flow seamlessly between your apps and Xero, helping you keep all your management information up to date.

  • Look for opportunities to automate manual processes.

    If there’s a low-level manual process in your business, try to find a way for your apps to automate this. For example, a credit control app, like Chaser, will send out automatic payment reminders to your customers if their invoice becomes overdue. And a bookkeeping app, like Receipt Bank, will snap photos of your receipts and automatically digitise and code the contents.

  • Research the app market in depth.

    Look at online reviews, talk to your industry network and find out which apps your peers trust and would recommend. Where possible, try out free trials and demos, so you have had some hands-on experience of the apps in your shortlist. The more user time you have, the easier your purchasing decisions will be.

  • Look for an excellent user interface (UI).

    If you and your team are going to be using an app every day, it needs to be easy to use, with a small learning curve. Choose apps that have a great UI and offer a quality user experience. The sooner you can get up and running with your solution, the more value this app will add for the business.

  • Partner with apps who offer excellent customer support.

    The functionality and ease-of-use of your apps are obviously important considerations when you’re looking to buy. But don’t underestimate the importance of solid, helpful and personalised customer support. Look for apps with phone support, good customer service ratings and a happy and satisfied user base. Check app forums to get the lowdown on this.

Talk to us about your app requirements.

Our job as your bookkeeping, accounts and payroll service isn’t just to deal with your numbers. We can also help you choose the apps that can deliver the most effective and productive business performance.

If you’re looking to create your perfect app stack, We’ll help you navigate the Xero app store and create a perfectly connected and integrated Xero system.

 

What is the Recovery Loan Scheme?

It’s been a tough time financially for many UK businesses over the past year. So, as we gradually begin to ease out of the pandemic, you may identify a need for extra funding to get your business operations back off the ground and on the road to recovery.

The new Recovery Loan Scheme replaces the now closed Coronavirus Business Interruption Loan Scheme (CBIL). It offers eligible UK businesses a way to borrow up to £10 million in extra funding. If you’re looking to stabilise and grow your company, this may be a lifeline.

The key points of the Recovery Loan scheme

The Recovery Loans are available as either term loans, overdrafts, invoice finance or asset finance. The scheme will provide cash-strapped UK businesses with the liquidity to get their business plans back on track. This can help you buy new equipment, hire new staff or invest more cash into the growth and expansion of the business.

Is your business eligible to apply for a loan?

  • Who is eligible?

The most important condition for the loan is that your business must be a UK trading company.                              Your  company must also be able to show that the business:

    • is viable or would be viable were it not for the pandemic.
    • has been impacted by the coronavirus pandemic.
    • is not in collective insolvency proceedings.  (Further details on this condition will be provided by the Government in due course.)

 

  • Who is NOT eligible?

Certain organisations are not eligible for the scheme, including non-UK trading companies, and UK-based banks, building societies, insurers and reinsurers (but not insurance brokers), public-sector bodies and state-funded primary and secondary schools.

  • What can I borrow?

    If you meet the above criteria, your UK company is then eligible to apply for a Recovery Loan from one of the approved lenders who have signed up to the scheme. Your options include:

    • Term loans or overdraft. – You can borrow between £25,001 and £10 million per business in the form of a term loan or overdraft.
    • Invoice finance or asset finance. – You can borrow between £1,000 and £10 million per business in the form of invoice finance or asset finance.
  • How do I apply for a loan?

    The Recovery Loan Scheme launches on 6 April 2021.  It will be open for loan applications until 31 December 2021. Details on the lenders providing the loan scheme are still sketchy, but it’s likely to be the same banks, lenders and business finance providers that offered the now defunct CBIL scheme.

NOTE: It’s worth noting that you CAN apply for the Recovery Loan Scheme, even if your business has already applied for a CBIL or Bounce Back Loan.

Talk to us about applying for a Recovery Loan

An injection of cash into your business may well be the boost that your company needs when it comes to securing your recovery in the post-Covid and post-Brexit landscape.

At Normans Ltd,  we will help you prepare all the numbers and reporting that’s required for your Recovery Loan application. We will also help put together a robust plan and strategy for how to use this extra loan cash, once the funds are made available to you.