With the 1st April 2022 deadline fast-approaching for all VAT-registered businesses whose taxable turnover is under the £85,000 threshold, we are looking at how the rollout of Making Tax Digital has gone so far and what to expect next.
Whether you are a small business owner or accountant, the Making Tax Digital (MTD) initiative is transforming tax administration as we know it. The main aims are for there to be less paperwork, fewer errors and also to keep accounts more up to date with real-time tax information. This is done by keeping digital records and using software such as QuickBooks and TaxCalc to submit VAT returns digitally. Since the April deadline for 2019, which encompassed all businesses over the £85,000 taxable turnover threshold, it has been possible to voluntarily join the MTD service. As of December 2021, nearly 1.6 million taxpayers had joined MTD with more than 11 million returns submitted. At least one third of those below the threshold have voluntarily signed up to the service. However, any businesses who have not already done so must now make sure they are compliant by April 1st 2022.
In a research study commissioned by HMRC it was found that businesses felt the costs of converting to MTD more keenly at the point of transition and then, with more regular use of the process, discovered that the benefits far outweighed the initial excessive costs of time and money. The only business owners who felt little to no benefit from the scheme, tended to lack the digital expertise and therefore had no confidence in what they were doing and if they were doing it correctly. These businesses often were not aware that they were most likely eligible for an exemption from MTD, as it was not practicable for them to use the necessary digital tools for their tax return. If a business has previously been granted an exemption for VAT online filing, this will carry over to MTD requirements. Citing costs alone as a reason to be considered exempt will not be accepted by HMRC.
Since the Making Tax Digital initiative was introduced, many more businesses have found that they require the services of an accountant. As well as an influx of new clients, accountancy firms have had to spend a lot more time with their clients ensuring that they are educated on the digital processes, that they have access to relevant software themselves and, if necessary, ensure that their workforce is properly trained in all matters relating to MTD. Overall, the new digital system should make an accountant’s workload more manageable and see usual peak periods leading up to tax deadlines diminish due to submissions being made more regularly and clients’ accounts being kept in better order.
The next phase of MTD has been postponed until April 2024 and will apply to all non-VAT registered businesses and landlords. Most commonly known as Making Tax Digital for Income Tax Self-Assessment (ITSA), this final stage will ensure that the vast majority of tax returns will be submitted digitally. You can do this yourself following instructions on the HMRC website or you can ask your accountant (agent) to do so on your behalf. You will need to keep accurate records of your business income and expenses, send quarterly updates to HMRC, submit an end of period statement at the end of the tax year and then submit your final declaration and make sure that your tax is settled by 31 January the following year.
To find all the help and guidance you need you can head over to the government website where everything is broken down for you or check out this link to a webinar which covers everything you need to know about Making Tax Digital.
https://register.gotowebinar.com/register/6535471142150179341
If you are still struggling with the transition to Making Tax Digital, Islam & Co Chartered Accountants are here to help you now. Contact us using any of the methods shown below or even leave us a comment and we will get back to you expeditiously.
By Katie Cleland – Social Media Administrator