Making Tax Digital for VAT Registered
A Making Tax Digital Heads Up for VAT Registered Businesses
Making Tax Digital is here, and deadlines are looming, especially for the VAT registered. Here are some key points to be aware of right now, plus key dates for the future for all types of businesses out there.
Many businesses are not in the Cloud yet and the government’s Making Tax Digital scheme (MTD), involving modernisation of our HMRC tax system, is already underway.
The idea behind MTD is that tax will become very simple and efficient to process. Tax information will be in one place (held within your digital account), paid for based on your business activity during the year; you upload, and tax is updated in real-time.
Phasing out the annual tax return
If you own a business, are self-employed, paying Income Tax, National Insurance, VAT or Corporation Tax – chances are, you will be affected by MTD. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and update HMRC (at least) quarterly via your digital tax account. Eventually, this will abolish the annual tax return. This will be law and penalties will exist for those that don’t comply.
Steps I can take as a business
Registering and logging into your digital account, is the first place to start. Accounts will be issued via the current Government Gateway. The main thing to be aware of, is your accounting software needs to be fit for purpose to update your account quarterly, at minimum. Most businesses will need to move away from desktop practices to Cloud-based Accounting software.
Businesses will need to choose Cloud software to maintain business records and provide updates to HMRC. You will be reminded to send summary updates directly to HMRC. Quarterly updates will need to be submitted within a month of quarter-end, and an end of year activity report, within nine months of the end of the accounting year.
If this all sounds daunting, don’t worry, our LHP Tax Team can advise you on the software you need and how to comply with new quarterly reporting requirements.
Key dates to be aware of…
- Over £85k VAT registered businesses: MTD for VAT has been active for circa two years. It started with businesses above VAT threshold limits (£85,000) in April 2019.
A year away:
- All VAT registered businesses: From 1 April 2022, MTD for VAT will apply to all VAT registered businesses regardless of turnover amount. The first VAT period to which MTD applies to all VAT registered businesses (who are not already doing so), will be the one commencing on/after 1 April 2022.
Two years away:
- MTD for income tax: MTD for income tax should become law from 6 April 2023. MTD for income tax will apply to the self-employed, partnerships and to those who receive income from property, with gross income from these sources combined above a threshold of £10,000.
For all enquiries on Making Tax Digital, please don’t hesitate to contact our LHP Tax Team on 01267237534. Or you can email email@example.com.