Making Tax Digital for eCommerce – are you ready?
With little over one month until Making Tax Digital transforms the lives of eCommerce retailers, we spoke to multi-channel eCommerce software expert Expandly about what Making Tax Digital means for online sellers and why it might be the push that eCommerce business owners need.
What is MTD?
Making Tax Digital (also known as MTD) is a government initiative to streamline and digitalise tax.
- Keep certain financial records in a digital format; and
- File VAT returns electronically using MTD-enabled software.
From April 2020, it is hoped that the success of phase one will lead to:
- Quarterly digital reporting of financial information; and
- Filing of other taxes using MTD-enabled software (e.g. corporation tax).
What MTD means for your eCommerce business
If your eCommerce business is VAT-registered, you will need to make changes as to how you store and report financial information. Specifically, you must:
1. Keep financial records digitally
Certain financial records (you can find a list here) must be kept and maintained in a digital format.
2. Use MTD-enabled software
Information must be sent to and received from HMRC via MTD-enabled software (including the submission of tax returns). A list of approved software can be found here. Although free software is available, the transaction limitations are restrictive for many eCommerce businesses – which is why most are opting for affordable cloud solutions such as Xero.
3. Create a digital link
Once your financial records are in a digital format, they must stay in a digital format – with no manual handling or copying and pasting. eCommerce businesses must, therefore, digitally link their invoice data from their sales channels into their MTD-enabled software. This can be achieved by using multi-channel eCommerce software (such as Expandly) which integrates your sales channels to automatically send sales orders to Xero (and in bulk to avoid Xero’s transaction limits).
Why MTD is the push eCommerce needs
eCommerce business owners already have a lot on their plate – and now they have to grapple with more regulations and new software – not ideal. But, at Expandly, we believe that MTD is an opportunity for eCommerce business owners to embrace new technology and the benefits that come with it, including:
1. Accurate records
Keeping your records in a digital format results in fewer typos, miscalculations and oversights. You have a more accurate overview of your financial situation and sales data, and you avoid penalties and fines for the incorrect reporting of information.
2. Cloud accounting
If you haven’t already made the switch to an eCommerce cloud accounting platform such as Xero, you’re in for a pleasant surprise – with multiple features that streamline and excel your accounting such as:
- A live financial dashboard;
- An on-the-go mobile app;
- Integration with software that automatically pulls your sales orders into Xero;
- Automatic tax calculations;
- Payroll functionality and more.
3. eCommerce technology
Multi-channel eCommerce software not only creates a digital link between your sales channels and MTD-enabled software, but it also includes other business-enhancing features:
- Individual and bulk listing across all of your sales channels (including free eBay scheduling);
- Invoicing and purchase orders;
- Inventory management;
- Shipping label printing and more.
Together, these features make multi-channel selling quicker, easy and more successful.
4. Reporting functionality
When used together, Xero and multi-channel management software provide you with a live overview of your business and with past data that can fuel your sales strategies, helping to grow your business.
And last but by no means least, cloud accounting software and eCommerce software save you time – completing manual tasks, such batching invoices, sending sales orders to Xero and associating bank accounts with different sales channels, for you.
MTD – where do I sign up?
For a free 14-day trial of Expandly’s multi-channel management software, click here.