Making Tax Digital (MTD) is a UK government programme to modernise the tax system and improve the functionality and ease with which businesses engage with HMRC.
The first stage of MTD for VAT starts in April, from which point HMRC will require all VAT-registered businesses to keep digital records and use software to submit VAT returns. Over time, the rest of the tax system will switch over.
Scots firms are well placed to capitalise on this and the escalating digitalisation of business. The country has the fastest growing digital economy outside London and, as part of a £1 billion investment by the UK and Scottish governments, Edinburgh and Heriot-Watt universities will train 100,000 Scots and 1,000 companies in data skills in the next decade.
There is a clear intention to position Scotland as an outward-looking digital nation and the data capital of Europe, with the Scottish Government recently committing £48 million to a National Manufacturing Institute for Scotland to accelerate innovation.
Despite this, many businesses feel intimidated by the fast-approaching MTD deadline and some are slow to adopt software for VAT compliance. There is no doubt that for some, this legislation marks a considerable step change.
It is, therefore, important that accountants and software providers communicate with business owners the options available to make the transition as smooth as possible. After all, compliance is one thing, but there are many advantages to managing accounts online, including access to a real-time view of financial health, saving time and reducing the risk of errors thanks to automating manual bookkeeping tasks. MTD has the opportunity to free up time for business owners to spend scaling their businesses and increasing their bottom line.
Change is never easy. Take traditional banking methods – such as cashing cheques or completing transactions within the confines of a bricks and mortar building. It now seems archaic that we used to operate under such rigid parameters. The banking landscape has revolutionised the way consumers and businesses operate. Studies show 35 million people in the UK will bank via a phone app by 2023, and it is no doubt time the tax system followed suit and embraced technological advancement.
Successful organisations will be those that keep pace with needs and demands of modern services and embrace the wider ecosystem of digital products. While the journey toward reforms like MTD may seem cumbersome, a digital revolution is already underway, and soon these processes will become a standard expectation. Now is the time for Scottish businesses to embrace digitalisation and increase their growth prospects as MTD, just like winter, is coming.
- Nick Williams, head of accountants, QuickBooks UK