Summit ERP provides insights to drive business growth for Gloucester based contractor
Barnwood Group chooses cloud-based Summit ERP
A conversation with mac-group
We had a chat with Michelle Boyle, Group Finance Manager at mac-group, about why she decided to add the Invoice Register to her Summit package and how it’s increasing efficiency across the business.
Summit Business Analytics: “This module provides a better way of reporting…”
Ede Homes is the latest RedSky customer to add the Business Analytics module to its existing Summit operational and financial system.
|I'd like to:
On The Horizon: Making Tax Digital
Tax expert Liz Bridge delivered another great talk at RedSky’s recent CONNECT User Conference about forthcoming tax changes that will affect the Construction industry. Here’s a summary of what Liz said about Making Tax Digital…
There’s an important potential tax change on the horizon – it’s called Making Tax Digital (MTD).
The MTD initiative began life as ‘Making Tax Simple’. However, the title had to be changed… for obvious reasons. It’s going to introduce, among other things, a discipline into tax-paying that exists for VAT but doesn’t yet exist for income tax and corporation tax.
Currently VAT-registered traders must produce at least quarterly returns: they know that their accounting runs quarterly; they do their VAT quarterly; and they pay VAT quarterly.
MTD is a system where everyone’s accounting system (i.e. their software) will be producing a quarterly return of receipts and expenses. Paper and pencils will have no place in the new MTD world, and the same is true of home-made Excel spreadsheets.
Everyone will be doing a quarterly return of receipts and expenses, and it won’t be tax adjusted. Accounts will be kept on software, so the trader will know (as will the Revenue) what his or her takings and expenses were for that quarter. At that point, HMRC will be able to provide an approximation of any tax that the trader should pay. Reporting will be compulsory and there will be penalties for non-compliance.
In essence, what we’re seeing is that returns for income tax and corporation tax are starting to move into the four-quarter structure that VAT uses. It’s happening very quickly: anyone who makes VAT returns will join MTD in April 2019, so their software must be MTD compliant; any non-companies who aren’t making VAT returns will join MTD in 2020.
When MTD is introduced, it will mean that records must be kept digitally within recognised software packages. Spreadsheets can still be used, but only in a format downloaded from HMRC or recognised software houses. In accounting terms there will be five returns each year: four quarterly receipts and expenses reports, plus the end-of-year reconciliation.
Anyone who’s trading below £10,000 a year will not have to be MTD-compliant. Any small trader who earns above that figure will be included, but their quarterly updates will consist of just three lines: receipts, expenses and net profit or loss. They must have the software, of course, but it will be available free of charge.
The Treasury has designed and will run a system for the voluntary payment of tax on a quarterly basis. The big question is: for how long will it be voluntary? There are strong suspicions that it won’t remain voluntary for ever. We’re moving towards a world where we pay our VAT, income tax and corporation tax quarterly, because the Government has found that the best way to collect tax is through quarterly reports and quarterly payment, while the money is still about.
It’s going to be a major change. There’ll be no manual adjustments; this will be an automatic submission from the accounting package. So construction firms need to start talking to their accountants and software suppliers about what they are doing to prepare for MTD. Here are some of the questions to ask:
- Are we geared up for MTD?
- Will we be ready when it’s introduced?
- How are we going to ease ourselves into this?
- What are we going to do?
- Are our subcontractors ready for MTD?
The long, short and tall of it is that MTD payments may be ‘voluntary’ at the moment, but you can bet your bottom dollar that they won’t be voluntary for long.
It’s going to be coming our way sometime soon. And the construction sector needs to be ready for it.
About Liz Bridge
Liz is Secretary to the Joint Taxation Committee – she’s paid by 10 trade federations in construction to provide tax advice to them and their members. She also represents the construction industry on legislation and works as a member of the First-tier Tax Tribunal. For more information visit: www.thetaxbridge.com
If you would like more information on RedSky and our product options please click here or call us on +44 (0)20 3002 8700.