What is Making Tax Digital?
On 1 April 2019 the Making Tax Digital (MTD) regulations will be brought in by the government. This means all VAT registered businesses with a taxable turnover above the VAT registration threshold (£85,000) must keep their records digitally and file VAT returns using HMRC compatible software.
Currently many find tax calculations and returns quite complicated. MTD regulations will aim to make it more efficient, more effective, reduce the some of the £9bn annual cost incurred due to errors and make the process easier for taxpayers to file VAT returns and get tax right.
How do companies comply?
From 1st April 2019, mandated businesses will need to keep their business records digitally. They’ll also need to file their VAT returns via HMRC’s new digital platform using a dedicated and compatible accounting software package or a combination of software packages or spreadsheets.
From April 2020, data must be exchanged digitally between all software used by any business for VAT, including relevant sales and lettings agents.
The onus is on submitting tax returns to HMRC via a company’s finance system as opposed to directly submitting on a manual basis. More than ever, it is crucial that the data within a finance system is clean and accurate. Digital systems such as an Invoice Automation solution support this by automatically posting clean, accurate and verified data directly into a finance system – thereby eliminating human error.
Are there any benefits to sales and letting agents?
Some may view MTD as another piece of admin or more work. However, it offers a great opportunity for companies to assess current finance and accounts processes and decide if there could be more effective methods such as automation. And with more MTD legislation due to be introduced across other taxes plus existing regulations such as reporting on late payments, it means agents can’t afford to ignore digital solutions when it comes to accounts processes.
From 1st April 2019, mandated businesses will need to keep their business records digitally. They’ll also need to file their VAT returns via HMRC’s new digital platforms.
Therefore, it’s worth looking at why traditional methods are prohibiting Accounts Payable (AP) teams and how and why automation can save time and money and decrease errors.
Do we still use paper?
Yes, a lot of UK companies are still using paper. For letting and sales agents the introduction of GDPR has helped to reduce this but only with personal data. For other business processes like AP, many still use paper, which is simply no longer time or cost effective.
One barrier to processing invoices quickly is that busy managers are often slow to approve invoices which can cause a delay in the process. This leads to finance teams getting chased by suppliers or having delays in income as invoices don’t go out on time. An automated system allows invoices to be hosted in a secure cloud network that can be accessed anywhere, allowing for a quicker approval process.
Duplicate invoices cause AP teams a headache. When invoices aren’t processed on time, suppliers will often send the invoice again when chasing payment. This can result in the invoice being handled and processed twice. An automated system filters duplicates so you don’t have to.
Fortunately for the sales and lettings business there are currently more than four million residential leasehold properties in the UK, and the number is growing by around 150,000 per year. On the downside however, this growth is accompanied by a commensurate increase in paperwork and transaction management.
This can lead to errors, with incorrect amounts or dates being inputted, which can in turn create more work and more delays. With automated data capture, the manual keying of information is eliminated, decreasing significantly errors.
Ultimately, MTD shows how serious the Government is about digitising tax, whilst also ensuring that companies keep clear digital records of all transactions and are able to prevent late payments to suppliers.
Although complying with new legislation can be seen as more of a hindrance than a help, investing in automation will speed up key business processes, reduce errors and cut costs. Adding automated AP systems combined with software to file VAT returns means sales and letting agents now have a more effective approach to digital transformation and automation.