Making Tax Digital – the next steps

Making Tax Digital (MTD) for VAT was launched in April 2019. As a result, hundreds of thousands of VAT-registered businesses above the VAT threshold of £85,000 are now digitally recording and reporting their VAT to HM Revenue & Customs (HMRC).

The rollout of MTD for VAT will now continue with the first reporting dates beginning in July 2019, depending on each business’s required reporting dates, and thereafter quarterly.

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 issued 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 the past few weeks, HMRC have sent out letters to a number of furnished holiday let landlords, inviting them to take part in its trial of MTD for Income Tax.

Some commentators believe the trial suggests that holiday let landlords will be one of the first business sectors to be formally required to submit Income Tax details online from 2021. HMRC is also allowing sole traders to test the software.

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.

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.

HMRC has begun to release some information – available here – regarding software which will be compliant with the new requirements.

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.

As a platinum partner of Xero software, which is fully MTD-compliant, our team can help you to prepare for the next stages of digital taxation reporting. If you are struggling with the complexities of the current VAT regime or would like help to prepare for MTD for Income Tax, please contact us.

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