Get your tax return done and dusted with, with these 10 end-of-tax-year tips for eCommerce.
The end of the tax year is nigh, which means you’re got ten months to complete your tax return, right? Think again. If you remember promising yourself in January that you wouldn’t leave it to the last minute next year, then we’re here to hold you accountable.
With a little extra time at home over the next few weeks, now is the perfect time to get your business finances in order with our end of year tax tips for eCommerce.
1. Make sure you’re MTD compliant
Following the introduction of Making Tax Digital last year, you should already be MTD compliant. However, if you’re new to the scene or a little bit unsure, we recommend reviewing your compliance.
You can find out everything you need to know in our guide to MTD for eCommerce, however, as a quick recap you should be:
– Keeping financial records in a digital format
– Transferring relevant information via digital links only (i.e. no copying and pasting between Amazon and Xero)
– Filing VAT returns via MTD software.
2. Integrate your accounting software with your sales channel(s)
Integrating your accounting software with Xero, SAP or whichever accounting software you use is the biggest end-of-year tax tip and time saver of them all. It also provides that digital link between software mentioned above.
Use eCommerce software to send your sales orders to Xero (other systems available) from Amazon, eBay, Etsy, Wish, Shopify, Magento and wherever else you sell. Even better, set your application to do this automatically on a daily, weekly or monthly basis in the future so that you can keep on top of your eCommerce finances and tax throughout the year.
3. Dig out those receipts
With the future a little uncertain thanks to the coronavirus, you want to ensure that your 2019/20 eCommerce tax return is as accurate as possible to save you the most money as possible.
Home office costs, shipping expenses, website domain hosting, fuel, professional services and even your Expandly costs can potentially be claimed back to reduce your taxable income.
If you’re using an expenses app like Xero, then you’re already one step ahead. If you’re not, dig out those receipts, keep them separate from your 2020/21 receipts and sign up to an app asap.
4. Reconcile your accounts
Ahhh, the wonderful task that is reconciliation. If you’ve never reconciled your accounts before you’re in for a treat. Reconciliation is where you match payments received from your sales channel(s) to payments received into your bank accounts.
We have a great (if we do say so ourselves) blog on how to reconcile your eCommerce orders in Xero, written by our very own CFO.
We won’t go into the details here, but we will say this – Expandly can help to make reconciliation a little easier by auto-marking orders as draft, approved or paid and auto-sending orders to the correct bank account or control account.
5. Check your tax settings
Tax for eCommerce certainly can be taxing. With different exemptions and rates for different countries, it can be challenging to get your head around what’s due by who. However, there are a few tools to help.
– Depending on the sales channel(s) you’re selling through, you can alter settings in the back-end to ensure you’re collecting the right amount of sales tax from customers.
– If you’re an Expandly user, you can add different sales tax rates via the platform.
– If you’re an Expandly user, you can also use Xero’s tracking categories to auto-assign orders to a country-tag and bulk apply international or exemption tax rates.
6. Do a stock count
We sure are giving you all the fun tasks today. Unfortunately, now is the ideal time to run a stock check too. This is required to ensure the product quantities held on Expandly and your sales channel(s) reflects the actual quantities held in your warehouse.
Any lost, damaged or deteriorated items can then be included in your inventory write-off figures, as appropriate.
7. Use an eCommerce accountant if necessary
You might consider yourself a Jack of all trades, but when it comes to taxes and VAT returns, involving a professional can actually save you money.
Knowing when to hire an eCommerce accountant can be a difficult decision for you to make, but for an outsider, it’s clear.
If you’re struggling for time, lacking in motivation, selling internationally or you’re winging it, involve a professional. They can complete the task quickly while giving you access to money-saving knowledge that you might not already have.
Even better, your eCommerce accountant can have access to your Expandly account too, so you really don’t need to do anything.
8. Don’t be afraid to ask for help
The 2020 Budget announced financial support for small businesses directly affected by the coronavirus or self-isolation. This includes a scale-up of HMRC’s Time to Pay scheme.
While the full details are yet to be confirmed, if you need help because of the COVID-19 outbreak, don’t be afraid to ask if it’s available by contacting HMRC or speaking to your accountant.
Further reading: Coronavirus advice for online sellers
9. Don’t leave it until the last minute
Yes, we know that the end of the tax year is some ten months before the deadline for filing your eCommerce tax return, but getting your financials in order now, saves you a lot of hassle come January.
Online self-assessment tax returns in the UK are due Midnight 31 January 2021 – don’t miss it.
10. Pat yourself on the back
You did it – you got your finances in order and your eCommerce tax return submitted way before the deadline. Which means come January, you can kick back with some leftover chocolates and mince pies, while all your competitors are burning the midnight oil.
There you go – ten end-of-year tax for eCommerce tips ten months in advance.
If you’d like to know more about how Expandly can help send your Amazon or eBay orders to Xero, book a live demo today.
You’ll see how easy it is to integrate your sales channel(s) with Xero, automate orders to Xero, map sales channel(s) and payment methods to different bank accounts and take advantage of Xero’s tracking categories.