After months of discussion, planning and some last-minute preparation by many businesses, April 1st will bring the implementation of Making Tax Digital in the UK.
The changes will have far-reaching implications for SMEs, affecting not just the way they interact with HMRC, but also the way they create, store and process their own financial information. For many, this will mean introducing new systems and processes that require them to operate in a very different way.
It is clearly a critical issue for businesses of all kinds yet, in recent months, it became clear that not all SMEs felt informed by HMRC and ready for the impending deadline. As a result, we felt it was important to find out the extent to which businesses were ready to comply with the changes required of them.
What we discovered surprised and alarmed us. Just a few months before the deadline for complying with Making Tax Digital, we found that many SMEs were completely unprepared for the changes they needed to make, with most having not yet taken any action at all to put in place the new systems and processes they need. Indeed, some businesses were not even aware of the Making Tax Digital initiative at all.
Others were deeply concerned about the security implications of filing tax returns digitally and about storing key financial information in a cloud-based system.
But the Making Tax Digital initiative is now a reality and will be the continued direction of travel for HMRC for many years to come, so SMEs need to remain engaged and stay up to speed with HMRC’s approach. Few businesses like change being imposed upon them, but this process has shown that proactivity is critical. A well-thought through plan of action is always going to be more beneficial than a rushed, makeshift solution thrown together at the last minute.
Our message to clients has been consistent: the short-term effort will be worth it in the long- term. Switching to digital record keeping has the potential to deliver considerable benefits to SMEs, as well as simply enabling them to comply with HMRC requirements. Going digital will give them greater clarity and transparency about how their business operates, which in turn has the potential to enable them to operate more effectively and efficiently.
Instead of being reliant on monthly accounting figures to provide a snapshot of their financial situation, for example, keeping digital financial records will give businesses access to instant, accurate, real time data and information whenever they need it. That can help them make better decisions, keep tighter control over cashflow, and enable greater connectivity and data-sharing between different areas of the business.
This means that with expert advice and guidance, digitisation can add real value to an SME and dramatically increase its appeal to potential buyers or investors. In this fast-changing world it not only demonstrates longevity, it also shows a real commitment to the business’ future which will really pay off in the years to come.