Newsletter June 2019

Making Tax Digital – spreadsheets or accounting software?

We have mentioned Making Tax Digital in the last two newsletters and make no apology for mentioning it once more.

VAT filing under MTD is compulsory for the first VAT return starting on or after 1 April 2019, so those that file monthly returns should already of filed under the new system.

Digital records can be a spreadsheet or accounting software. It does depend to a certain extent on the type of business you run as to which method you choose. However, there are some potential “drawbacks” in using spreadsheets.

It is very easy to overwrite a spreadsheet completely, delete it, or make changes – inadvertently or otherwise.

Changes made to a spreadsheet will not be automatically picked up for inclusion on the next VAT return – whereas accounting software will “trap” all these adjustments.

It is quite easy to get formulae wrong.

Depending on the sophistication of spreadsheets, they may need complete reanalysis when preparing the annual accounts.

We do appreciate that accounting software is not always the best solution either though.

Come and talk to us now – we can help you decide how to proceed with your digital record keeping.

Expenses claims

How do you deal with expense claims in your business?

Are these on a spreadsheet? Have you considered how time consuming this might be; someone types the entries into the spreadsheet, and someone else possibly then re-keys them into the accounts software.

There are cost effective solutions and options to streamline this area. One way is to enter them direct into the accounting software (there can be permissions to enter expenses only – no need for the staff to see anything else). An approval process can also be put in place.

There are also dedicated expenses apps which integrate with accounting software.

One of the advantages of using such products is the ability to take a photograph of the expense document. The data can be extracted from it automatically and populated into the accounts. There is no need to retain the paperwork on files anymore.

If this is of interest, please give us a call to discuss further.

Tax savings by giving money away?

Do you make payments under “gift aid”? You may make regular direct debits to your favourite charity, or you may do one-off sponsorships e.g. a charity walk or parachute jump. You will probably be asked If you want to make the payment under Gift Aid. By doing so, the charity is able to benefit by more than the amount you pay over. It is able to reclaim 25% of the amount given from HMRC. So give £80, and the charity reclaims £20 – giving it £100 in total.

However, by making such gifts, you can benefit too by noting these on your tax return if you are a higher rate tax payer; for a basic rate tax payer there is no tax effect. So continuing our example, £80 is given to the charity. If you are a 40% taxpayer, this reduces your tax bill by £20 – so the net cost is £60. Therefore, please remember to make a note of these gifts throughout the year and let us have the details along with your other tax information. We can let you have a form (in Excel or PDF format) to record these gifts if you would like one.

A word of warning – if you or your spouse does not pay tax, do not tick the Gift Aid box. You may end up with a personal tax liability!