Making Tax Digital for VAT – The Last Step
Now is the Time to Act
Making Tax Digital (MTD) – ‘Not that old chestnut’ we hear you say. As your accountants, we make no apologies whatsoever for bringing the topic up again and urge you to read on for our latest update.
MTD, announced back in the 2015 budget by George Osborne, is the biggest shake-up in taxation legislation for over two decades. If you have a VAT-registered business with a taxable turnover over £85,000, you are already required to keep digital records and, using compatible software, digitally file your VAT returns. This is called Making Tax Digital (MTD) for VAT.
Some businesses, with a turnover under the VAT threshold, voluntarily opt to register for VAT, usually because they mainly deal with VAT-registered clients. Currently, these businesses are not required to sign up for MTD for VAT, but can do so if they wish.
However, from 1 April 2022, all VAT-registered businesses in the UK must be MTD for VAT compliant, regardless of turnover. This means all VAT returns will need to be completed and submitted using a compatible software package that connects to HMRC’s systems. Manual records and some existing accounting software packages will no longer be acceptable and the current Government Gateway system for submitting VAT returns will be withdrawn.
At Greaves West & Ayre we have been actively promoting the use of cloud-based accounting software for a number of years. We believe that there are many benefits for our clients as well as ourselves, aside from compliance with the MTD regulations. These include multi user access, being able to give a clear overview of your financial situation in real time from virtually anywhere and mitigating the cost of expensive software updates.
We have a dedicated team who are here to help you adapt to the changes. We can discuss your specific requirements and answer your queries to ensure your business is ready before the deadline. If you are a VAT-registered business not yet submitting your VAT returns under the MTD system, we urge you to contact us as soon as possible.
The Government has also announced that from April 2023 Making Tax Digital for Income Tax will be introduced. From this date, any self-employed person or landlord who earns more than £10,000 in total (before the deduction of expenses and other tax reliefs) will be required to digitally file records of their income and expenditure with HMRC on a quarterly basis. This will mean keeping digital business records using software which is approved by HMRC and compatible with their systems. Further information and software announcements are being released all the time.
We are monitoring all updates and will provide further details on this stage of MTD in due course. MTD compliance is mandatory. Non-compliance will result in penalties being imposed by HMRC, therefore the earlier you prepare for the changes the better. Whether you need to have your books in order and systems updated by April 2022 or April 2023, we’re here to help