MTD Compliance for Clients

If your clients have  a VAT Registered business with a taxable turnover above the VAT registration threshold (currently £85,000) they are required to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software. The vast majority of businesses will need to do this for VAT periods starting on or after 1 April 2019. Businesses with a taxable turnover below the VAT threshold can also sign up for MTD for VAT voluntarily.

The MTD pilot for VAT started in April 2018 and is now open to VAT businesses and their agents mandated to use the service from April 2019.It’s important that your clients have the appropriate software package, so if they already use accounting or record keeping software you should also enquire from those software provider to find out when it will be updated for MTD.

When MTD for VAT will be mandatory for business

If the taxable turnover drops below the VAT registration threshold at any point after 1 April 2019 the clients are still required to continue to keep digital records and send HMRC their VAT returns using MTD-compatible software. This obligation doesn’t apply if they de-register from VAT or if they are exempt from MTD for VAT.

For a small minority of businesses that have more complex requirements, HMRC have made the decision to defer mandation by 6 months to ensure there is sufficient time for testing the service with them in the pilot before they are mandated to join. These businesses have until 1 October 2019 to start keeping records digitally and using MTD-compatible software to send their VAT returns to HMRC.

This applies to those that fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (such as government departments and NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.

What happens if the taxable VAT turnover is below the VAT MTD threshold

If the clients have a taxable turnover below the VAT threshold they can still sign up for MTD voluntarily. HMRC is encouraging businesses with a taxable turnover below the VAT threshold to sign up so they can also benefit from MTD. Businesses can also sign up for MTD for Income Tax. This means, subject to the business type, you can further streamline the clients’ business processes. You can read more about MTD for Income Tax further down.

What the businesses need to do to be ready to sign up for MTD

Your clients will need to keep their business records digitally from the start of your accounting period. If they already use software to keep business records, check the software provider’s plans to introduce MTD-compatible software.

If they don’t currently use software, or their software won’t be MTD-compatible, you’ll need to consider what software is suitable for their requirements.

HMRC has published details of the  VAT and Income Tax software  available for MTD.

Clients using spreadsheets for business records

A spreadsheet can be used to calculate or summarise VAT transactions to arrive at the return information needed to send to HMRC.

If you use spreadsheets to keep your clients’ business records, you’ll need MTD-compatible software so that you can send HMRC your clients’ VAT returns and receive information back from HMRC.  Bridging software may be required to make spreadsheets MTD-compatible. You can read about the ‘bridging software’ below.

The information must not be physically re-typed into another software package .

Records that you need to keep digitally for MTD for VAT

MTD does not require your clients to keep additional records for VAT, but to record them digitally.

The clients’ digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged. They should also include information about your business, including business name and principle business address, as well as their VAT registration number and details of any VAT accounting schemes they use.

MTD-compatible software

Compatible software is a software product or set of software products that between them support the MTD obligations of keeping digital records and exchanging data digitally with HMRC through the MTD service. If more than one application is being used, data that flows between those applications must also be exchanged digitally.

Digital records can be kept in a range of compatible digital formats. They do not all have to be held in the same place or on one piece of software. For example, a spreadsheet can be a component of digital record keeping provided the product that consolidates records, or summary records from the spreadsheet, can exchange data digitally with HMRC.

HMRC will give businesses until 31 March 2020 to make sure there are digital links between software products. Before that date, cut and paste will be an acceptable way to transfer information .

The exception to this is where return information is to be transferred to a software product enabled for an Application Programming Interface (an API provides a secure link between software and HMRC) and designed to submit the 9-box VAT return (such as bridging software). In those circumstances the transfer of information must only be digital.

You need to discuss with the software providers in case of any doubt.

Bridging software

‘Bridging software’ is HMRC’s description of the digital tool that can take information from other applications, for example, a spreadsheet or an in-house record keeping system, and lets the user send the required information digitally to HMRC in the correct format.

Finding out what software is available for MTD

HMRC has published details of the  VAT and Income Tax products  that are currently available and will be adding to this in the coming months as the pilots progress and more products become available. You can find details of all the software including bridging software at the HMRC page along with features of all the software listed.

Income

HMRC has launched a voluntary MTD pilot for Income Tax in spring 2018 and you may want to consider joining this. Read about how to join the MTD pilot and about  using software  to send Income Tax updates.

You can find out which  software  is already available to send Income Tax updates for MTD on GOV.UK.

So, if you liked these suggestions and want to read more about it, you can explore other  useful articles that would help you grow your accounting practice at our blog.We at info@米6米乐体育 help accounting firms become more profitable and grow considerably using your existing resources.  Please contact us at kevin@sapphireinfo.net   or call at 02030026314 to book a consultation call to see how we could help you integrate outsourcing into your practice.

What does it cost to hire a new Employee today?

Are you planning to hire a new team member for your practice? An accounts assistant would cost about £ 23000 these days varying from about £21k to £29k based on a city. You would be wrong if you consider this to be your total costs for a new hire. There are various other employment costs that you need to keep in mind too.

Hiring Costs

To get the right person you would either take help of some recruitment agency or do it yourselves on social media and job sites. The recruitment agencies normally charge around 20-30% of yearly pay, which would come around £ 5000. In case you use LinkedIn or other job sites such as monster it will cost you around £300 – £ 500, add your time costs for interviews etc.

Bonuses, NI Contribution & Pension

A bonus has become a norm these days and average payment as per govt estimates are around 5% of yearly pay. Employer NI contribution adds another 13.8% & pension adds 2%. Total costs around 20%.

Other Overhead costs

As if this was not enough there are various other hidden costs to be considered too.

Office space – The cost of providing a desk in your office. Calculate this from your rent.

Office Equipment – Computers, peripherals, phone line etc.

Training – Most of the new employees would require in-house training just to understand your way of working. This would normally come to 10-15 days of time.

Misc. – HR costs, Sick pay, Holiday cover, maternity leave etc.

Total Employee Costs

  1. Salary                                – £23000
  2. Hiring Costs                     – £5000
  3. Bonus, NI & Pension       – £4600
  4. Other Overheads           – £8000

The total amount that you would spend on a new hire in the first year would be £40600 as opposed to £23000 that you would pay. The total costs nearly double the “perceived costs” and small to mid-sized practices need to budget carefully while taking on a new member on their team. No doubt taking on new people is essential for the future growth of practice but creating unnecessary financial burdens also take its toll.

We at info@米6米乐体育 provide ample opportunities to accounting practices to grow their practice by outsourcing their work to us. You can expand and grow without extra financial strain on the practice. Please contact us at  info@米6米乐体育   or call at 020 3012112 for further details.

Importance of WIP (Work In Progress) Sheets in Practice!!!

Closings are the time of month you dread the most. Many enterprises form businesses to govt entities dislike the time as they need to put in extra time & energy to close their books. The public and other stakeholders rely on receiving reliable financial information on a monthly basis. But an accountant is the only person responsible for preparation of management accounts and information required for various stakeholders on a timely basis. This is where a work in process sheet is essential.

The goal of monthly WIP sheets are to:-

  • Use it as a tool to plan & allocate your available resources.
  • Tool for timely completion of monthly tasks in hand.
  • Outline due dates.
  • Document responsibility of each resource person for achieving the targets / completion of tasks.
  • Keep the whole practice on course.

It should be used as planning tool to determine available resources vice versa the time required to complete the tasks in hand. In terms of shortfall of resources you might feel to postpone the important tasks to a later date & vice versa in case of excess of resources postpone some tasks for next month. Needless to say that monthly WIP sheets play an important role in ensuring your practice stays on course.

We at info@米6米乐体育 provide ample opportunities to accounting practices to grow their practice by outsourcing their work to us. You can expand and grow without extra financial strain on the practice. Please contact us at  info@米6米乐体育   or call at 020 3012112 for further details.

5 COMMON ACCOUNTS OUTSOURCING MYTHS ~ BUSTED! (PART-2)

  1. Cheaper the labor, lower the service quality.

It is a general tendency to assume the quality of a commodity in proportion to the cost price. But, when the global factors are in play it is a whole different game. In India, there are a lot of skilled, highly-qualified and experienced graduates  in the workforce.  Service provider’s long track record of working in the British environment is an asset.

info@米6米乐体育 is able to successfully provide you a competitive pricing as compared to other local outsourcers as it is located in a sub-urban area (as opposed to a metropolitan). The skilled and trained qualified workforce along with the locational advantage is what info@米6米乐体育 offers to all its clients.

  1. Outsources have tendency to extend the working relationship which is against the long-term interests of the company.

The process of outsourcing is at best an ‘evolving’ one. Both parties see in time how things are working for them, what needs to be changed so on and so forth. As a business looking to outsource your operations one should openly discuss the plans for the future with their outsourcing vendor, which must be signed under an agreement between both firms.

Being straightforward about the kind and volume of work will ensure that confusions are kept at bay.

Communication is the key!

  1. Constant excuses for not delivering as promised.

Such hitches can be avoided by ensuring that you choose an outsourcing company with high work ethics and adherence to the standards of service quality. The accountancy getting their work outsourced should keep the teams (both offshore and onshore) involved, giving incentives and appreciation as an encouragement to work harder.

At info@米6米乐体育 we maintain a strict regime of maintaining and adhering to the work processes. We also ensure timely exchange of information between the client and the team to avoid any kind of gap that may lead to unwanted delays.

  1. Different person to deal with every time.

It is the basic protocol of any outsourcing firm to dedicate a specific team to their client. The team manager (Accounts Manager in this case) will be there to receive any query or instructions from the clients end. In case there is a new person on the job info@米6米乐体育 ensures that he is properly trained to deal with the specific conditions of the client and a prior notice is given to the client informing them about the change.

  1. Impossible to bring the services back in-house In future.

Or is it? Most accounts outsourcing businesses have their own technical infrastructure. At info@米6米乐体育, we access your systems through a remote desktop access. At any point you wish to bring back the activity into your facility, you simply change the login details provided to us and that would terminate our access to your system. All data is kept and processed on your systems and none of it is held by us.

5 Common Accounts Outsourcing Myths ~ Busted!!! (Part ~ 1)

Outsourcing your core services (bookkeeping, tax preparations, payroll etc.) can prove to be an intimidating task, since you’ve never done it before or are dealing with a new outsourcing vendor of a new
country. And often, these fears and uncertainties can give birth to a lot of myths. Let’s try and bust some!

  1. Outsourcing is only for big and mature companies

This is the most common myth among the newly established British accountancy practices (small-scale to medium scale) that prevails. But, contrary to the popular belief, the decision to outsource their activities if a fruitful one as these practices are looking to grow from startup to a mature organisation.

The erratic nature of work inflow is what info@米6米乐体育 is beautifully accustomed to and hence is more than ready to tackle it.

  1. Communication and Technical Infrastructure imbalance

An expert outsourcing company will always be ready to deal with gaps in communication by ensuring superiority in technology and related equipment; establishing clear communication lines between the firm and the client and guaranteeing that the right person receives the necessary information.

At info@米6米乐体育 communication is usually maintained between the parties via telephone, emails and online video conferences.

Our separate IT department is adept in dealing with sustenance of such technical requirements of the business.

  1. Cultural and linguistic differences creates obstacles in mutual understanding

Usually, this poses a risk if the outsourcing firm is in direct touch with your clients. The language style and cultural nuances become impediments to your success. But, as an outsourcer to another British accountancy practice there is little or no such risk.

info@米6米乐体育 boasts of qualified, well-versed and capable staff dealing with the British atmosphere for about a decade now. Issues regarding the matter (if any,) are dealt with speedily and sorted out in no time.

  1. Lack of control and management

Managing personnel in-house is a lot easier. From operations to training to communications you have the ability to exercise control to ensure the standards are met. Ideally, a premier service provider ensures a well-trained staff, adjusted to your preferences and protocols.

info@米6米乐体育 has been working with British chartered accountants since 2004, and has ensured that with timely communication and control, the jobs are executed as per the desired standards.

  1. Time Zone difference

Nobody can deny that there are issues in outsourcing to firm based in another country. But, such difference that also affects the work flow can be continually overcome by establishing flexible communication channels. Any urgent work can be done on priority and be promptly replied to and the normal operations can be done within the usual prescribed timeline.

At info@米6米乐体育, we pre-establish the work principles regarding the frequency and mode of communication along with singled out professional staff dedicated to your firm.

Accounting Outsourcing–Gaining ground in the United Kingdom

IT (Information Technology) outsourcing has been a significant trend globally for more than two decades now. US have been a leader in the world in outsourcing due to the combination of high overhead costs and strong cultural affiliation between the US and Asian technology companies. Most of the accounting outsourcing work started with requirements of companies worldwide to provide services to accountancy firms in the world.

As the business model proved successful, a lot of companies outsourced their Customer service, data entry and financial services later. If the US has been at the front to outsource the work, then it is India which has been a significant service provider. At present, it is estimated that at least 285 out of Fortune 500 companies outsource some of their work to countries in Asia.

So where is the need for a firm to look for accounting outsourcing its work? 

Like all businesses, accountancy firms are there for profits and long term sustainability. Some of the major issues confronting the firms are:-

  • Staff Costs form a significant part of the operational costs.
  • Small firms and startups have difficulty scaling their resources to meet the fluctuating needs of the business.
  • Tougher competition in a slowing economy.

In the midst of all this accounting outsourcing services in UK are growing every year. Most of the top 100 firms are either actively involved in the process or are on the lookout. The primary mode of operation of these firms has been to set up captive centres in India. Apart from large accounting firms, large companies like BT and even some government councils etc. actively outsource their finance and accounting work to India.

However, it has been seen that only a small percentage of small and medium practices have hired outsourced accountant. There are apprehensions about various issues like staff non-cooperation, software licensing, security issues, work quality, fear of redundancy of essential work etc., and these firms are trying to find a way out of these concerns. Many firms are just testing the waters and selectively indulging in the practice of accounts outsourcing to take care of the busy season.

What have been the significant benefits of  outsourced accounting services  ?

Operational costs are a significant draw as it decreases. There is also an increase in the total chargeable time of the existing staff, which allows them to concentrate on high-end work. Otherwise, even savings from the outsourcing funds an additional full-time person with analytical capabilities for generation of consultancy work, business valuations, acquisitions, forensic accounting etc.

There are other hidden advantages also as you move from papers to scanned documents, some document management system comes into place. Moreover, as you interact with the service provider through emails, it forces the firm to be more precise and more disciplined in their communication.

We do feel that outsourced bookkeeping shall continue to grow in the UK at a faster pace than earlier and it shall be a significant trend for the coming years for the reasons as summarised below:-

  • Firms that don’t consider accounting outsourcing as an option will be at a competitive disadvantage in the near future.
  • Significant cost savings are possible by moving the online bookkeeping to non-UK locations like India, where the talent is capable and cost-effective.
  • Using emerging technologies and finance function services will reduce headcount, producing even more significant savings.
  • Firms will need to develop internal systems and discipline to achieve these changes.
  • Cost is not the only motivator. So is flexibility and the ability to change.

 

By:  Kawitansh Khanna  CA (Director,  info@米6米乐体育 Info Solutions (P) Ltd .)