Is your expense management system prepared for the introduction of Making Tax Digital?
As all finance leaders will be well aware, the deadline for switching over to the new Making Tax Digital (MTD) regime for those who pay VAT is now just a few weeks away. However, one recent study from YouGov suggests that more than 30% of affected firms could still be unprepared for the move – which, in a twist of bad timing, happens just a handful of days after the supposed date of Brexit. Many parts of a firm’s finance function will need to change – but just how will your expense system be affected? Here’s how your expense management tool will need to adapt.
What is MTD?
The scheme has been born out of concern from Her Majesty’s Revenue and Customs (HMRC) that the Exchequer is losing a significant sum of tax revenues on a regular basis due to manual input errors. One estimate has claimed that the government is haemorrhaging tax revenue at a rate of over £9bn per year as a direct result of errors made by those filling out tax returns – and with so many bureaucratic hurdles in the way of filling out what should be a fairly seamless return, it’s easy to believe that this is true. As a result of the changes, VAT payers will now have to use software for their reporting and, specifically, software that integrates with HMRC’s own.
Your expenses system
When employees submit expense claims there has always been the need for a paper trail recording the cost incurred, when, where, for what purpose and proof that the expense was paid for. The trouble is that this paper trail often literally uses paper – and is therefore much more vulnerable to things going wrong. Paper can get lost or damaged even if it’s been safely filed away in a filing cabinet, for example, while it can also become more vulnerable to errors given that there’s no guarantee that the person filling it out has double-checked their sums.
As a result, it’s wise to think about switching to a digital expense filing system that automatically checks the arithmetic and legitimacy of the figures that have been inputted. This system can then transmit the information to your tax return software – so when it comes to recording accurate profit and loss, there’s less chance of an error. The same goes for expenses incurred as a company in relation to suppliers. Given that companies often face questions around how to list their disbursement costs on their VAT return, accurate expense data is vital.
Additional benefits
Not only can this kind of tool ensure that you are compliant in terms of your VAT taxpaying obligations with MTD around the corner, but it can also boost rates of time saved. It means that you’ll no longer have to waste finance team time manually double-checking expense forms for errors, as the computer system will have done it for you.
Tweaking your expense management system in the face of MTD shouldn’t be too hard. And with plenty of additional benefits such as time saved and lower data entry burdens also on offer, there are plenty of reasons to invest in some smart staff expenses software sooner rather than later.
