AccountsPortal Blog

Making Tax Digital timetable amended

An important announcement regarding the MTD timetable was made on 13 July 2017. As per the HMRC website:

Under the new timetable:
  • only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
  • they will only need to do so from 2019
  • businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020

Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.

As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.

All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.

AccountsPortal will continue to work with the HMRC to ensure we deliver feature that are fully integrated with the government's MTD solution. Our intention is to provide this functionality ahead of the new timetable requirements and we will provide more information as we get closer to release.

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Making Tax Digital — What Your Small Business Needs to Know

Here at AccountsPortal, we're pretty excited about Making Tax Digital — the UK government's initiative to make preparing, reporting, and filing taxes faster and easier (although probably not less financially painful!). Making Tax Digital is going to change a great deal about how small business owners deal with their taxes, and we'll explain what that means for you.

Naturally, our online accounting software is built to handle the Making Tax Digital challenges, but we know that's only part of the solution. Rather than just provide a long list of all the changes, we've thought about all the questions that you need answered. Then, we dug into the details to get the best answers to all those questions.

Can you give me a quick summary of what Making Tax Digital means to my small business?

Here are the main points you need to know:

  • Making Tax Digital affects all businesses and landlords.
  • Making Tax Digital is compulsory — you will need to start using it in 2018, 2019, or 2020, depending on your business circumstances.
  • You will need to record your various tax affairs digitally, using online accounting software or an app.
  • You or your accountant will then provide electronic information to HMRC on a quarterly basis.
  • Making Tax Digital should reduce the amount of time, effort, and stress it currently takes to prepare and file taxes.
  • You will get a centralised view of all your tax information, entitlements, and liabilities, so you know exactly how much you owe at any point in time.

General Information About Making Tax Digital

What is “Making Tax Digital?”

It's an initiative led by the UK Government and HMRC designed to make it faster and easier for people to record, understand, and file their taxes electronically. It was originally announced in 2015.

Who does Making Tax Digital impact?

Almost everyone. If you pay tax and file a tax return in the UK you will be affected — this includes businesses, landlords, individuals, nonprofits, and more. Essentially, if you file a tax return, use an accountant, or get income from any place other than standard PAYE payroll, Making Tax Digital matters to you.

HMRC has stated that Making Tax Digital won't impact on people who are pensioners, solely paid through payroll / PAYE, or who have a secondary income of less than £10,000.

Is Making Tax Digital the same as filing a tax return online?

No. Making Tax Digital is a completely new approach to reporting on, updating, and filing tax information. For individuals, the self-assessment tax return will, over time, become a thing of the past.

Is Making Tax Digital Compulsory?

Yes. All businesses and some individuals must use the new digital systems that HMRC has created to file their taxes electronically.

Can Online, Cloud Accounting Software Help Me with Making Tax Digital?

Absolutely. Good online accounting and bookkeeping software can be integrated directly with Making Tax Digital. Software like our very own AccountsPortal will make recording, checking, and transmitting tax information to HMRC almost effortless.

How Making Tax Digital Will Impact Your Small Business

What are the expected benefits from “Making Tax Digital” for my small business?

Here are the main benefits of Making Tax Digital:

  • You get a complete view of all your tax information, liabilities, and entitlements from a central place — your personalised digital tax account.
  • It increases accuracy and reduces errors involved in reporting and filing taxes, so you only pay what you legitimately owe.
  • You will have an up-to-date understanding on exactly how much you owe and the tax payments you will need to make. You don't need to wait until the end of the year to understand how much you or your business owes.
  • Updating HMRC with your business and financial information will be faster and easier — meaning more time for you to grow your business.
  • There's a lower chance of unwelcome compliance checks and audits from HMRC. Good news!
  • You'll get digital nudges and prompts from HMRC to ensure you are capturing and reporting the correct information at the right time.
  • Online billing means you can easily pay your tax straight away.

When must I start using Making Tax Digital?

April 2017 Update
The clause to introduce digital reporting was initially expected to be included in the final Finance Bill. However, as a result of the call (in April 2017) for a snap general election, the relevant clause was excluded from the Finance Bill and, as a result of this, it is not clear if the timeline below will be pushed back or not.

The proposed timelines for businesses, self-employed people and landlords to start using the new digital service are as follows:

  • April 2018 - Income Tax and NICs reporting for unincorporated businesses and landlords with turnover above the VAT threshold
  • April 2019 - Income Tax and NICs reporting for unincorporated businesses and landlords with turnover below the VAT threshold. VAT Reporting for all businesses (unincorporated and incorporated) registered for VAT.
  • April 2020 - Corporation Tax submissions for all relevant businesses.

Note that these deadlines could change based on government consultations, so check the HMRC website or with your accountant for the latest information.

Individuals in employment and pensioners will not have to use the digital service unless they have secondary incomes of more than £10,000 per year from self-employment or property.

HMRC expects businesses to update their tax records and information quarterly.

Will “Making Tax Digital” reduce the amount of paperwork and information I need to provide to HMRC?

We know, tax paperwork can be almost endless — unless you have excellent accounting software — but you'll be glad to know Making Tax Digital will reduce that burden (and also save a few trees along the way!). It will bring together details from various areas and make that information available to HMRC automatically.

For example, HMRC can gather details from employers, banks, building societies, and other parts of the government. They can also collect earnings details from your employer, or pension information from the Department of Pensions and automatically update it in your tax account. This will reduce the amount of reporting and information gathering you need to do, and that can only be a good thing.

“Static” information should only need to be provided once, resulting in less work and administration from small business owners and accountants. Perhaps the biggest change for most people and businesses is that the yearly tax return will be a thing of the past, as will quarterly VAT returns which will be submitted directly from your accounting software.

How much will the transition to Making Tax Digital cost my business?

HMRC won't charge you anything to move to Making Tax Digital, however updating your internal business processes and other admin might have a hidden cost. HMRC consulted on this and estimated the average cost would be £280 per business. Their website states that this cost is likely to arise from:

  • Time spent training on new digital tools and quarterly submission of information.
  • Purchase of new apps and upgrading existing software. If you're already an AccountsPortal customer, you don't need to worry about this point.
  • Some businesses may need to purchase new hardware or upgrade existing hardware.
  • Additional accountancy/agents costs.

Does this change how I, my accountant or tax agent interact with HMRC?

Indeed it does. You can interact with HMRC digitally in a way and at a time that suits you. In addition to the personalised digital tax account, HMRC will provide support, advice, and prompts to you through various digital channels.

You can contact HMRC through web chat and secure messaging. Even better, your digital record-keeping software can be linked directly to HMRC's systems, making it fast and easy to accurately exchange important information. Of course, AccountsPortal will fully support Making Tax Digital.

Will Making Tax Digital reduce the chances of an audit or compliance checks?

Probably. HMRC states that it, “wants to help businesses get their tax right first time and to prevent them from feeling punished for making honest mistakes. That means reducing the likelihood of errors, lowering the chance of unwelcome compliance checks and giving businesses greater certainty that they are getting things right.”

Your New Small Business Tax Account

In addition to MTD, the way you view and pay personal tax as an individual will change.

What is a “personalised digital tax account?”

The personalised digital tax account is at the heart of Making Tax Digital. It contains all of the available information that HMRC holds on you, your business, your taxes, and various other areas. You can check that these details are current and accurate and correct them if not.

This personalised account means you can get one single, complete view of your, and your business's tax liabilities and entitlements. Think of it as similar to an online bank account, except that instead of telling you what you have, it tells you what you owe!

HMRC has said it will use this information to tailor services to particular types of taxpayers, for example small businesses, non-profits, individuals, and others. The initial rollout of these accounts is planned for late 2017.

Will “Making Tax Digital” help me understand how much tax I owe?

That's the plan. One of the biggest benefits of Making Tax Digital is that HMRC will collect and process information to calculate your tax burden much more quickly, hopefully “in real time.” This will help to prevent errors and will ensure you don't get any nasty payment surprises!

Getting Your Small Business Ready for Making Tax Digital

This section lists the details the steps on what you need to do next.

How do I need to keep records for Making Tax Digital?

HMRC has stated that businesses can continue to use spreadsheets (shudder!) or three-line accounts in certain circumstances. They have stated there will be free software for businesses with straightforward tax affairs but won't be delivering this themselves. Businesses will not have to make or store receipts or invoices digitally. Notwithstanding this, we highly recommend using small business accounting software that integrates directly with Making Tax Digital.

How do I get ready for Making Tax Digital?

There are two main things you need to do to get ready for Making Tax Digital:

  • Ensure you're using software or apps that can integrate with HMRC's Making Tax Digital system.
  • Talk to your accountant about how they can help you prepare for Making Tax Digital.

Here's some more detail on exactly what you will need to do:

  • Keep track of your tax affairs digitally using online accounting software or apps.
  • Provide tax data to HMRC quarterly, using digital tools. This tax data can be created automatically from the information in your accounting system.
  • Provide a complete end-of-year position to HMRC using digital tools.
  • Work with your accountant to ensure everything is recorded and reported correctly.

How will AccountsPortal support MTD?

Although we, along with everyone else, are waiting for the final requirements to be published by HMRC, we have already started the process of preparing our systems to be able to provide a fully integrated solution for MTD. We are working with HMRC to allow our systems to communicate directly with HMRC's systems, which will allow for the necessary submissions to HMRC directly from within AccountsPortal. This includes quarterly Income Tax/NICs returns, VAT returns and the End of Period Statement.

Where can I find more information?

You can find more information on the HMRC website:

As you can see, Making Tax Digital isn't actually that complicated, so long as you have the right software to make the most of the new system. The combination of more transparent taxation, a centralised view of your tax status, and the reduction in effort, time, and stress could mean Making Tax Digital is a great thing for you and your small business.

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VAT Report enhanced to address Limited Cost Trader changes

Please note this only impacts UK users registered under the Flat Rate Scheme (FRS).

April 2017 is the first reporting month effected by the recent changes to the FRS scheme.

The VAT Report has been enhanced to warn users that they might need to calculate their VAT result with the Limited Cost Trader Rate of 16.5% instead of the industry rate they are registered under. There is a link to the HMRC calculator set up specifically to help you make the determination.

If necessary, users can select the option to recalculate the report using the 16.5% rate (or 15.5% rate if you are in your first year of registration).

Saving the report will generate a journal entry to adjust the VAT Control account and recognise the impact of reporting VAT for the period as a Limited Cost Trader.

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Custom email settings allow you to change the From Name and Email Address

By default all emails that you send from your organisation in AccountsPortal will use your profile name and login email address. However, if you have multiple users logged into a single organisation, you may find it preferable to have all emails originating from a single email address, irrespective of who is logged in.

If you want all emails from your organisation to come from a single From Name and Email Address, then our newly released Custom Email Settings are for you! You now have two options for outgoing email addresses - the logged in user's or a custom email address.



The logged in user (default email address setting)

  • The Reply to email address is the logged in user's login address.
  • The From name is the logged in user's profile name.

Custom email address

  • The Reply to email address is a custom email address for all emails sent by any user from your organisation.
  • The From name is the name you choose when you add your custom email address.

For more information, please read the Email Settings help document.

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UK VAT - Reminder of FRS changes effective 1 April 2017

UK users registered under the VAT Flat Rate Scheme (FRS) should be aware of the changes commencing 1 April 2017. For more information please read VAT Notice 733.

If you are certain you will be considered a Limited Cost Trader moving forward, then we recommend you create a new 16.5% Flat Rate Tax Status in your organisation's Settings prior to entering any invoices or bank transactions.

We will be enhancing the VAT Report in the next few weeks to assist with users that are 'periodically' Limited Cost Traders.

Are you leaving the FRS Scheme as a result of these changes?

Please pay particular attention to section 12 and 9.6 if you are leaving the FRS scheme as a result of these changes.

Set up a new Tax Status in the Settings of your organisation, and ensure that the Valid From Date is set to 01-04-2017. This must be done before before you enter any April transactions (even if you are deregistering from VAT entirely).

The system will calculate the correct values in your VAT report unless you are leaving the FRS 'cash basis' and do not plan on continuing under the Standard VAT cash accounting scheme. Under this specific scenario, you will need to enter payments against any outstanding invoices and credit notes to get them included in the VAT Report as per the section 9.6 requirements.

Replacement invoices and credit notes should be created with the Tax Treatment in the header set to 'No VAT/Out of Scope'. This will ensure that they are not included in any future VAT Reports but the Accounts Receivable ledger account and customer balances are set back to the correct amounts.

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Customer and Supplier Overpayments

Up until now, the approach for Customer and Supplier Overpayments was to enter separate bank transactions for the invoice amount and the overpayment amount. The overpayment amount was entered as a General Receipt or Payment against a nominal ledger account. This was not ideal because the amount didn't update the Accounts Receivable/Payable account or appear in the Ageing reports or Statements.

The release of the new overpayments functionality removes the manual steps and vastly improves the reporting gap. Overpayments is now done in a single step and is correctly reflected in all relevant customer/supplier reports. The feature can also be used for Advances and Deposits where VAT is not applicable.

Overpayments can now be entered as follows:

  • Directly in banking using the new 'Overpayment' transaction type
  • Automatically in banking when entering an 'Invoice Receipt/Payment' transaction type
  • Automatically in the invoice overview screen when allocating a payment


This release also includes the display of amounts available to credit against an invoice when viewing sales or purchase invoices. The credits can be allocated directly in the invoice view, greatly speeding up transaction entry.


For more information, please read the Overpayment from Customer or Overpayment to Supplier help documents.

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UK VAT Flat Rate Scheme (FRS) Changes from 1 April 2017

As part of the Autumn Statement released on 23rd November 2016, the Chancellor of the Exchequer announced that there would be changes to the VAT flat rate scheme (FRS) effective 1st April 2017. A policy paper was published on the 5th December 2016 to coincide with an 8 week consultation period whereby businesses would be given an opportunity to comment on the proposed changes.

The changes are being introduced to remove what the HRMC see as ‘unfair’ advantages that some small businesses enjoy when using the FRS.

The Proposed Change

Currently the flat rate percentage used by a business is determined by their trade sector. Going forward, however, HMRC intends to introduce a new cross-sector rate (set at 16.5%) for businesses deemed to have limited costs, otherwise known as ‘limited cost traders’.

A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period; or

  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (or pro-rated for periods less than one year)

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

  • capital expenditure

  • food or drink for consumption by the flat rate business or its employees

  • vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle to carry out those services)

How will I be impacted?

If you fail the tests above, it is likely that your VAT liability each period will increase. The policy paper states that an online tool will be made available to enable current and prospective FRS users to determine whether they must use the new rate. The added administration burden is that businesses are expected to review that they are using the correct rate at the time each VAT return is completed; i.e. on a period by period basis.

In essence, the policy aims to remove most service orientated companies (such as freelancers, consultants, etc) from being able to benefit from the Flat Rate Scheme. If your business provides services, rather than goods, then it is highly likely that you will fail the relevant tests.

It therefore makes sense that all businesses using the FRS review their position before April 2017 to ensure that there are still advantages to using the scheme.

Example

ABC Ltd, a Computer repair services company, currently uses the 10.5% sector rate when calculating FRS VAT. For the VAT quarter ending 30 June 2017, they have VAT inclusive sales of £10,000. Based on the ‘limited cost trader’ test, the flat rate they should apply to their sales be determined as follows:

Scenario Goods Spend in quarter Check 1:
Less than 2% (£200) of quarter Sales
Check 2:
Less than £1,000 p.a. (£250 per quarter)
FRS Rate
1 £360 No No 10.5%
2 £240 No  Yes 16.5%
3 £150 Yes Yes 16.5%

In the first scenario, the business exceeds both tests (i.e. the purchase of goods exceeds 2% of the quarter's sales and is more than the £250 quarterly threshold) and can accordingly use the 10.5 Flat Rate. However, in the second scenario, the business only spends £240, which is less than the £250 quarterly threshold, and must therefore use the 16.5% rate. Lastly, in the third scenario, the business fails both checks, and must use the 16.5% rate.

With sales of £10,000, the business can only apply the 10.5% rate once their spend on goods (including VAT) has passed £250 for the quarter. Below this amount and they will fail both checks.

Next Steps

AccountsPortal will be monitoring the results announced at the end of the consultation period. We will endeavour to incorporate the changes into our FRS feature and will notify users as soon as we have more information.


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Custom CSS for your online accounting invoices

You can now take our great invoice templates and give them your own makeover - styling the CSS of invoices, credit notes and purchase/sales orders is now possible.


This gives you the ability to completely change the colours and style of your online invoices, and make adjustments to the layout. We're excited to see what kind of designs you can come up with! You'll need some experience in HTML and CSS - head over to our Customise CSS help document for more information.

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Accept Online Payments using Stripe


Stripe is one of the leading online payment providers and has shaken up the market with its seamless integration and highly competitive rates. The pricing model varies from country to country but in the UK, for example, charges are as low as 1.4% + 20p per transaction. This makes Stripe a great option for just about any business or individual looking to accept online payments and keep the associated costs as low as possible.

We are very excited to announce that you can now accept payments through Stripe directly from your AccountsPortal online invoices. This means that you can now get paid even faster, thereby improving your cashflow and have all the information automatically reconciled in your online accounting software.

The entire setup only takes a few minutes.

  • Log in to AccountsPortal and register for a Stripe account (or link your existing Stripe account).
  • Activate Stripe for all of your relevant invoice templates.
  • Ensure that the public invoice link tag [online_invoice_link] is in the body of your invoice email.

That's it!

Customers can now pay your invoices online with the click of a button and automatically generate a bank transaction in AccountsPortal marking the invoice as paid.  

Please see the Stripe Integration help document for more information.


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Default Tax Rate for Specific VAT Treatments

This change is only relevant to VAT registered organisations based in the United Kingdom and will be implemented on 11/07/2015. It impacts the use of the following VAT Treatments (all of which do not allow the use of Tax Rates greater than 0%):

·  Sales of Goods to Customer outside EU

·  Purchase of Goods from EU Supplier

·  Purchase of Services from EU Supplier

·  Purchase of Services from Supplier outside EU

Previously, there was no specific Tax Rate defaulting when one of these treatments was used in an Invoice or Bank Transaction. This resulted in Exempt Expense usually being selected as the next available option. 

As of 11/07/2015, whenever one of these VAT Treatments is used, the default Tax Rate will be No VAT unless the default is taken from a Bank Import Rule or Product setting. The motivation for this change is that the use of No VAT results the more commonly required outcomes defined in the help document VAT UK – Box by Box.


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