In 2015 George Osborne announced changes tosimplifyto our tax system – the demise of the annual tax return for everyone and to simplify how tax is collected. So where are we now and what can we still expect?
- Making Tax Digital (MTD) for VAT was introduced in April 2019; the soft transitionperiod has expired and HMRC may now issue penalties for the late filing of digital returns.
- All VAT registered businesses with turnover exceeding £85000 should now be using digital links to submit their MTD for VAT returns via their accounting software (which they use to maintain VAT records) quarterly –is your software capable of receiving information from HMRC via its accounting programme interface (API)?
- Spreadsheets can be usedbut ‘cutting and pasting’ will no longer constitute a digital link.
- From April 2022 –all VAT registered entities will be required to file their VAT returnsonline- you will need to sign up for MTD for VAT keep records digitally and use compatible accounting software to make your submissions quarterly.
- Sometime after April 2022 – HMRC are planning to ‘switch off’ their current links on gov.uk which currently enable you to submit your VAT returns via your VAT online account.
- Online accounting for some individuals will become mandatory after April 2023.
- It is expected that individuals receiving property income income from a self-employed trade (to include a partner’s share in profits from a partnership) in excess of £10000 will need to comply with online accounting.
- Digital reporting for companies and other entities within the change to corporation tax is set to be introduced in 2026.
Digital tax reportingwill create an additional burden for non-VAT registered businesses and individuals.
Whilst professional bodies are asking HMRC to reconsider their requirement for the submission of quarterly returns the government seem determined tomodernise our tax system and ensure that we all pay our taxes sooner that we would otherwise.
The majority of our compulsory VAT registered clients were already using some form of accounting software prior to the changes that came in in April 2019. So just an initial time investment was required to register and link up systems in order to ensure they remained compliant with the new MTD rules.
Any companiesand individuals that required digital tax reportingcompliant software were transitioned over to Xero and many of our clients have found that online accounting has given additional benefits in other areas of their business and allows day to day record keeping to be completed much more efficiently.
Speak to Chloe Saberton on 01223 810100
If you operate a VAT registered business – you are registered for Making Tax Digital butyou are concerned about the compatibility of your accounting software; or you have not yet registered for Digital VAT reporting and would like to be prepared ready for next April.
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