In April 2019, government legislation will change. Companies who are above the VAT threshold of £85K will have to keep digital tax records by law.
Software as a service (SaaS) based accounting software will be essential for many companies who have not yet adopted this model. Cloud-based computing and remote working in other forms are already taking businesses by storm, but governmental laws have now taken a leap that will push many companies into using SaaS applications.
The Changes Involved in Making Tax Digital
In the primary legislation, Clause 62 for Digital reporting and record keeping for VAT states the introduction of Making Tax Digital for VAT. This means that the way businesses currently keep records, accounts and returns will not change drastically in itself - but the move from paper to digital will.
HMRC will have the power to ensure that businesses continue to submit digital records and they can also specify rules and regulations as to how the digital records should be kept. Additionally, it means that companies must provide their VAT return information to HMRC through Making Tax Digital (MTD) by using functional compatible software. It is worth noting that HMRC can also specify how these digital records are kept and can further detail conditions that must be complied with. For more information on the primary legislation visit Gov.uk for a full breakdown of MTD and functional compatible software.
The secondary legislation includes changes to third-party software - as software must now be compliant and compatible with the HMRC application programming interface (API). For example, this means businesses will now have to work with SaaS software approved by HMRC and keep records in a way that are also compliant with regulations.
The secondary legislation also allows for more frequent voluntary updates to VAT records, once again executed digitally. Although this new regulation may at first seem overwhelming, it is an ideal opportunity to streamline your wider business operations. Rather than thinking of it as a headache, digitisation of your tax and VAT records can be a great way to consolidate your paperwork and increase the efficiency of your business.
The Benefits of Digital Accounting Systems For Your Business
Accounting software is more and more integral to day-to-day business operations.
Technology such as Xero and other SaaS programs can help you to work on accounts and tax digitally and remotely. Accountants are moving towards cloud-based software and moving away from locally stored documents. The benefits of these cloud-based systems are huge - they are updated in real time and can also integrate other applications and software into cloud-based bookkeeping. This means no more sifting through receipts and taking up hours of labour to do accounts. Software such as Xero can even integrate into job management systems such as Okappy.
Digital accounting software is changing financial services into a leased service. Whilst many businesses search for ways to reduce costs - spreading payments for software services over longer periods is a great first step to make. Managing finances on a pay-as-you-go subscription fee is much less daunting in terms of a financial commitment than paying an upfront fee for server-based software.
SaaS subscription fees can be useful for startup businesses and those trying to reduce bulky admin costs. They also mean that businesses can keep on top of their taxes as they go, rather than leaving it all to the week before the end of the tax year.
There is also another reason that SaaS is becoming increasingly popular - access. In the past, people were initially wary of committing fully to digital and cloud-based software. But, now the internet is so present in our daily lives, businesses and individuals are relying more heavily on digital services. The average internet user conducts business, banking and shopping online - so why not cloud-based accounting and tax?
Working in real-time is a huge benefit of these digital systems. Another huge benefit of SaaS is the integrations that are available. Okappy can be integrated into digital cloud-based workbook systems to further streamline your in-house admin services.
All in all, cloud-based accounting software is a huge leap in terms of governmental regulation. Incorporating cloud-based software applications will help your keep your business ahead of the game as industries make the next steps towards full digitisation.
If you’d like to read more about how to improve efficiency in your business read our blog Top 5 Ways to Make Your Business More Efficient!
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