All businesses with a turnover of £85,000 or more must keep digital records and make quarterly digital VAT returns.
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 ensure their affairs are reported 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 from 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.
With regard 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. These include sole traders with income from one or more business, as well as income from letting UK property.
HMRC is 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.
XERO Platinum Partners
One of the best ways to ensure that you are ready for each Making Tax Digital development is to sign-up for Xero. At Macalvins, we are Xero Platinum Partners and so we can provide you with the highest levels of support. Read more about our support for Xero here.
Get in Touch
We offer no obligation meetings so you can pop in and see if Macalvins is right for you free of charge. You can rest assured that with Macalvins we shall be moving forward together. We look forward to hearing from you