HMRC Digital Tax changes are coming
For those small business owners amongst you, the news that HMRC intends to integrate all businesses and individuals into a digital tax regime by 2020, would have been about as welcome as Michael Gove at Boris Johnson’s birthday party. The announcement has already caused a storm of controversy, with 110,000 small business owners petitioning against the change. They argue that quarterly reporting would cost time and money, whilst providing an excuse for HMRC to gain greater insight into business finances. The fear being that this will inevitably result in more frequent and higher demands for payment.
Whilst we all naturally maintain a healthy level of scepticism regarding the intentions of Government institutions, HMRC’s justification that this will allow for more accurate tax calculations would be a welcome improvement, and petitions aside, businesses and individuals should be preparing themselves for this change. But this doesn’t have to be bad news. With the technology that is now available to small businesses, this is actually a huge opportunity for business owners to perfectly position themselves to take advantage of the changes that are already affecting the way that people do business.
The hidden opportunity in this
The idea is that with the advancement of cloud accounting software, businesses large and small should now be, or soon will be, in a better position to embrace digitised tax submissions on a quarterly basis. Some of the details are yet to be ironed out on accuracy requirements and the mechanics around the quarterly submission, but with a little help, the process shouldn’t be as burdensome as it at first appears.
The availability of software like Xero means that once onerous exercises such as tax calculations, become a lot simpler. Why? Xero runs in real-time, which means your data is always up-to-date. This means that if you are already operating your business on a real-time basis, the requirement to submit tax information once a quarter is of minimal inconvenience, as the data is already available.
A recent survey by KPMG found that small businesses management accounts are, on average, four months out of date. But forget about tax compliance issues here for a second the real killer benefit is still to come!
KPMG’s survey also identified a direct link between current financial information and likely growth for these businesses. Those with accurate information grew twice as fast as those with nine-month-old data over the last 12 months! In simple terms, those companies who are on top of their finances are best placed to make more informed business decisions which are advantageous to the success and growth of their business.
This is just the beginning
Aside from the above, Xero can offer you a multitude of other benefits as well. Xero partners with hundreds of other great businesses who have developed add on applications which work seamlessly with their own technology. If you are currently spending hours manually inputting expenses into your records, seriously, stop, there is a better way. Maybe you spend your Sunday mornings reconciling your bank account to your invoices, with Xero it’s automated, meaning you get precious hours of your life back. Not only this, some of the add-ons can actually help you get paid faster! Once you feel like you’re in control of the day to day business, you might want to advance to a reporting dashboard which can provide you with all sorts of interesting analysis into your businesses performance. Read more about these add-on partners in this blog we did recently.
The beauty of it is that this opportunity is available to all businesses, whether you’re a plumber, a builder, a hairdresser or a coffee shop owner, everyone would benefit from the advantages that cloud accounting has to offer. Complying with digitised tax submissions are just the beginning of the world that awaits your business by embracing this new technology. The argument therefore that the transition will cost you time and money, is not necessarily true. The efficiency offered by cloud accounting will actually save you time, and the cost of a subscription to software will be far outweighed by the benefits it has to offer.
If you want to find out more, or you feel like you need a little bit more convincing, contact Chilli Accounting and we’ll advise you on the potential benefits to your company.