Making Tax Digital – Next Steps
Making Tax Digital (MTD) for VAT was launched in April 2019. Hundreds of thousands of VAT-registered businesses above the VAT threshold (£85,000) are now recording and reporting their affairs digitally to HM Revenue & Customs (HMRC).
The rollout of MTD for VAT will now continue with the first reporting dates beginning in July 2019 and then continuing quarterly depending on each business’s required reporting dates.
Those with more complex VAT affairs have an extension until October 2019, by which point all VAT-registered businesses will need to comply. This may include public sector bodies and some charities.
Businesses are currently benefitting from a ‘soft landing period’, which will last up to a year, to get MTD for VAT in place and be reporting their affairs accurately to HMRC without facing a penalty.
MTD for Income Tax
Originally, other forms of taxation, such as Income Tax and Corporation Tax, were meant to follow on from the requirements for VAT April 2020 at the earliest.
However, following the 2019 Spring Statement, the Government included an amendment in a Written Ministerial Statement, which confirmed that MTD for other forms of tax would be delayed until April 2021 at the earliest.
The legislation is currently drafted in such a way that the obligations are likely to begin with effect from the start of the first accounting period beginning after 5 April of the year in which MTD for Income Tax becomes mandatory.
In relation to Corporation Tax not much has been revealed yet by the Government, but it is expected to be introduced alongside or shortly after Income Tax reporting for MTD in 2021.
Time to prepare
This new process will require a far larger number of businesses, including those below the VAT threshold, to report their affairs digitally on a quarterly basis, this includes sole traders with income from one or more business, as well as income from letting UK property.
HMRC are currently in the process of testing and releasing information on software and the options for Income Tax.
The tax authority has begun to release some information on what software will be compliant with these new requirements, which can be found here.
However, it is expected that this list will grow considerably to incorporate other software providers as the date for implementing new systems grows nearer.
Although, the date at which full implementation of MTD has been delayed, it is imperative that businesses and individuals start to review their systems and processes to ensure they are ready for this landmark shift in taxation.
If you would like help preparing for MTD or are struggling with the complexities of the current VAT regime, please contact email@example.com or call 01423 566086.