5 Simple Ways to Help your Franchisees Be Ready For ‘Making Tax Digital’
As the franchisor, you will have responsibilities to keep your franchisees informed of changes and influences which will have an impact on the individual businesses operated by your franchisees.
So, if you haven’t started to talk to your franchisees about this and pointed them in the right direction to ensuring they are ready to comply with this new Government requirement, then we hope this blog will help you.
So what is Making Tax Digital all about?
I’m sure you will have heard lots about this already as it’s been in the pipeline for sometime and there are still some elements of the practical application of this initiative which are still being consulted upon.
Basically, this is a Government objective to digitalise the tax system in the UK and to end the current annual tax return.
This will mean that businesses can no longer rely on submitting one annual tax return and will instead be required to submit information to the HMRC quarterly.
By 2020, most businesses, including companies, partnerships and individual taxpayers who are self-employed and those letting out property, will be required to keep track of their tax affairs digitally and update the HMRC every quarter.
The HMRC have indicated there will be sanctions for late submissions and late payment. The exact details are yet to be confirmed as they are still subject to consultation period which ends in June. It has been confirmed that the maximum penalty will be £3k.
When will this start?
It depends on whether your franchisee is VAT registered and also on their turnover.
From April 2018 – it will be for all self employed, businesses and landlords with a turnover above VAT threshold £85k
From April 2019 – it will be expanded to include all self employed, businesses and landlords with a turnover above £10k
The timing of the quarters when submissions will need to make will depend on when the financial year runs from and to and so, like VAT returns, it can vary and won’t be the same for everyone.
So what can you as the franchisor do to help the franchisees?
Within your franchise, you may require your franchisees to do their accounts in a specific way or using a specific software or it could be that your franchisees can do this in whichever way they like as long as they provide Headquarters with the information you require. For some, there may be little impact but for others who aren’t doing regular bookkeeping or using a bookkeeping software, this could be a very significant change for them.
So here are 5 simple things you can do to help your franchisees;
- Communicate with the franchisees and tell them about it. You can give them the key information and encourage them to talk to their bookkeeper and/or accountant in more depth about what it means for them and what they will actually need to do to submit information quarterly to the HMRC.
- Invite an expert to come and speak to your franchisees at your next training day so they can ask questions and get all the information they need.
- If you have franchisees who are not using a bookkeeping software for their accounts (either doing their bookkeeping themselves or via a bookkeeper) and you don’t have a preferred software, do some research on the cloud based softwares and decide what you think would be a good solution that you can recommend. The major bookkeeping software providers are all currently developing their softwares to enable businesses to submit their information via their existing software. As a bookkeeping practice, we recommend Xero software. It’s a very easy to use software and they are always at the forefront of the new technology and improving and enhancing their offer to customers and will have a making tax digital solution with their software.
If some of your franchisees are already fully utilising a bookkeeping software for the accounts for their business then they are already on the right path to having all the information needed for quarterly reporting. All the main bookkeeping software providers have been working on this for some time and will be putting a solution in place for the HMRC quarterly submissions to be made. The HMRC have stated that there will be a recognition process that all software vendors providing a Making Tax Digital solution will have to go through and a list will then be published.
- If you have franchisees who are going to need to learn to do their own bookkeeping on a bookkeeping software themselves or find a bookkeeper to do this for them, use the directories you can find on the bookkeeping software websites to find bookkeepers and accountants who specialise in the software you have chosen. They can help get businesses set up on the software, train them in how to use it or even do the bookkeeping for them. For example, Xero have a Xero Adviser Directory where you can find all the Xero Certified Users in the UK. Other softwares such as Quickbooks, Kashflow and Free Agent have the same.
- Keep up to date with the developments on Making Tax Digital and keep your franchisees informed. There are the elements of the scheme still being consulted on and trialed and so there is still a lot more detail which will be being published over the coming year and which will affect the final practical arrangements as to how this will all work.
As a bookkeeping practice that works with both franchisees and franchisors, you are very welcome to contact us for free advice if you have any questions about this blog or if you would like us to help you with any communications or support to your franchisees for Making Tax Digital.