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Making Tax Digital

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HMRC is underway with its strategy to digitize the taxation process and in 2016 there will be millions of people with digital tax accounts.

If you’re not ready yet, you will need to be soon as the planned roll out date is April 2018, with full transformation being achieved by 2020.

HMRC plans to transform the tax system, so that it is more effective, more efficient and easier for taxpayers.

Who does Making Tax Digital Apply to?

At this stage MTD only applies to sole traders and partnerships. HMRC are developing the technology details and your accountant or bookkeeper will get regular updates from HMRC. Limited companies and Directors are expected to be covered in a consultation document later in 2016.

HMRC are proposing that MTD only applies after you reach a total turnover or income of £10,000 per annum. So far, the thinking is that businesses under this threshold would have an extra year to comply with the rules.

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What does Making Tax Digital mean for me?

First, the HMRC myth buster – telling you all the things that are not true about the tax system transformation.

HMRC have produced their own helpful myth buster. The main one being that you will not be required to file 4 tax returns a year. Instead you will be required to send data about income and expenditure on a quarterly basis. Expenditure is expected to be broken down into certain categories.

How do I send the data to HMRC?

You’ll send the data from your online (cloud) accounting software. If you are using a manual, paper based system you will have to move to cloud accounting software. This is likely to be Xero or QuickBooks Online, or possibly FreeAgent for contractors. HMRC has confirmed they will not be providing their own free software and digital software that having software that links to your HMRC tax account will be mandatory. No more boxes of papers that are more than a year old.

You can see that Receipt Bank bookkeeping software will be a solution for many, and the accounting software will be compulsory for all (with a few tiny exceptions, not covered here).

Each business will have (probably 9 months) after the year end to submit final figures – an End of Year declaration.

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What else do I need to hear about MTD?

You will have the option to report more frequently than quarterly, which will be helpful for seasonal businesses.

HMRC is not currently planning to change tax payment dates.

The cash accounting basis limit may be extended. If that means nothing to you, ask your accountant who can explain this to you.

The details are still in consultation stage, and the end date for comments is 7 November 2016. We encourage anyone interested to read and feed in their comments.

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3 Things you can do to get ready for Making Tax Digital

  1. It makes sense to move to accounting software. Cloud-based software gives you the opportunity to work from anywhere you can get an internet connection.
  2. Consider some of the expenses capturing apps – snap your bills and receipts and send direct, or export and upload to your accounts.
  3. Find an accountant to help you. The right accountant will become a trusted colleague. Since tax is going digital, make sure you choose a tech savvy, experienced accountant.

Want to know more?

Contact a cloud accountant or bookkeeper to get advice on how to get ready for Making Tax Digital.

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Time-Tracking on projects and WorkflowMax

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WorkflowMax Advisers helping you manage projects

Project based businesses

If you work in a service industry, for example, if you are a Creative agency, an Architect, a Building & Construction business, a Consultant, Engineer or an IT Services firm –  you will probably work on a project for a client that lasts more than a few weeks, months and sometimes even years. You may need to invoice your client at regular intervals, and keep the work on track and within budget. Because of the long tail nature of this type of work knowing your numbers, and keeping on track are even more important.

Slicker Workflow

The way small businesses function today, has dramatically changed. The quicker and slicker your workflow is, and the closer you are to knowing your numbers – the better placed you are to make a profit.

In the past small businesses have used a variety of software bolted together – and that meant poor  integrations that really didn’t work well. This approach leads to work duplication like double keying, inaccessible data, the need to access multiple systems and then to analyse the data when it’s merged together. You may be aware of these kinds of inefficiencies in your own workflow system, but maybe you haven’t looked for a more modern, integrated solution yet? If your business processes are painful, time consuming and costly maybe you need to look at simpler, more efficient solutions.

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Workflow Solutions

Workflow and profit are closely linked, and accountants nowadays need to be cloud integrators and workflow advisers as well as number crunchers. The days of a once a year chat with your accountant should be well and truly over, especially if you work in one of the industries mentioned above.

What about WorkflowMax?

WorkflowMax offers you a complete, cloud based solution to manage projects and jobs. It’s often all a small business needs when it’s integrated with Xero accounting software, or any of the add-on apps available do you can customize your system to suit your business.

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What is needed for service, project based businesses, is a complete and powerful solution – whatever the size of your team. With everything in one system and in the cloud, data is always up to date everywhere and accessible from anywhere. Reports give you useful insights that are always real time and available upon the click of a button.

You can free trial WorkflowMax for 2 weeks or you can talk to one of our WorkflowMax Advisers by getting in touch with us to see how we can help make your workflow better.

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