Like most industries, the hospitality sector has seen its operations hit hard by the COVID pandemic and now, Making Tax Digital (MTD) will require them to adapt to something new yet again.
Here, we’re going to look at what MTD is, the impact it’ll have on the hospitality industry – and how digitisation and cloud-based accounting software can help businesses keep pace with the changes.
About Making Tax Digital For Hospitality
MTD is the UK government’s push for businesses to digitise taxes and make submitting returns to HMRC easier. Companies must use MTD-compatible software that's compliant with their standards.
There is a threshold system in place for MTD which means that firms must comply in stages, depending on the type of business they are and their turnover.
MTD states that:
- If a business’s annual taxable turnover is £85,000 or above, it should already be submitting MTD-compliant VAT returns. From April 2019, VAT-registered businesses with an annual turnover above £85,000 started keeping digital records and submitting their VAT returns using software that was compatible with MTD.
- If the business is VAT-registered but earns under the £85,000 threshold, it would have started being affected by the second stage of MTD for VAT from April 2022. All VAT-registered businesses will need to follow MTD from this date (unless they are exempt).
MTD for VAT does not require firms to keep any additional records than before, however, they are required to input daily totals instead of weekly or monthly ones (this doesn’t mean they need to do accounting every day, just that the daily totals are inputted when they do).
- If a hospitality professional is not VAT-registered but is self-employed with an annual turnover of £10,000, they will need to follow MTD for Income Tax Self-Assessment (ITSA) from April 2024. It’s important to keep in mind that ALL business and/or income from property counts towards the threshold. So, for example, if someone runs a tea/coffee stall that makes £8,000 a year but also makes £4,000 a year from property income, then they will be required to comply with ITSA.
- If someone earns below the £10,000 threshold, they can continue to use the existing HMRC system to submit their self-assessment VAT returns.
- If the business is a general partnership, it will not need to follow the MTD rules until April 2025. However, it’s considered best practice to set up early so when the time comes, the transition will be seamless and not cause disruption to accounting.
Why Hospitality Businesses Should Use Xero Software To Make Their Tax Digital
With these changes, it’s simply vital that hospitality business owners chose software that offers complete support to MTD. Having the right MTD-compatible software should not only make managing tax obligations easier but it’ll also make it simpler to manage business finances as a whole.
Xero is a popular software suite that many businesses are using to make their tax digital. Home to a vast library of apps and features, it has been specifically designed to simplify the accounting process and allow firms to not only correctly record and store their data securely but make the whole activity quicker as well.
With Xero, hospitality businesses can:
- Take and track credit/debit card payments with point-of-sale integrations that integrate directly with Xero.
- Know exactly where the business stands immediately with Xero’s real-time dashboard, even helping it to stay on top of its cashflow on the go through the Xero app.
- Save details of everything that is purchased and sold, as well as track the quantities and values of items in stock – all thanks to its simple inventory functionality.
- Create recurring invoices for suppliers to save time on monthly accounting – businesses will only need to input the data once and there’s no risk of them being missed or left unpaid.
- Effectively Plan Day for staff – Xero provides the ability for businesses to spend less time updating timesheets and manages rotas with ease. It can also efficiently schedule staff in line with working time rules and regulations and even provide a self-service app that staff can use to punch themselves in, improving timesheet accuracy.
If you run your own hospitality business and are interested in using Xero to make your tax digital, why not get in touch with our cloud accounting experts today? We provide bespoke cloud accounting solutions for a range of business types and sizes. Xero provides a great way for any business to customise the management of their accounts – saving time, money and effort that would be better off spent elsewhere in the business.
Interesting in learning more? Get in touch with our accounting experts today!
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