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Making Tax Digital (‘MTD’) is an HMRC initiative attempting to transform the UK tax system, with more regular and detailed submissions of information and payments of tax to HMRC electronically.
Whilst it has been delayed several times, it aims to make tax administration more effective, efficient, and easier for taxpayers through the implementation of a fully digitalised tax system, whilst also reducing HMRC’s overheads for managing tax affairs.
The first wave saw VAT registered businesses, with a turnover over £85,000 (‘the threshold’) submitting their VAT returns either through compliant software, such as FreeAgent, Quick Books, Sage, Xero or a bridging software. If the business is VAT registered but turnover is beneath the limit, they could opt-out. All businesses here should now be compliant.
What’s happening in 2022
From 1 April 2022 it is now mandatory for all VAT-registered businesses to use MTD-compliant software or bridging software. Previously this only applied to VAT-registered businesses who had turnover over £85,000, as explained above, as businesses beneath this threshold could choose to opt-out.
Despite many delays in the rollout, HMRC confirmed that this will be going ahead, despite the current climate stating “…MTD is succeeding in its central aims of reducing errors, while also making it faster to prepare and submit returns and boosting productivity for businesses.”
Therefore, where the VAT period commences on or after 1 April 2022, VAT returns will need to be submitted electronically to HMRC:
- If your VAT quarter ends in March, your first MTD submission will be for the quarter ending 30 June 2022, which needs to be submitted by 7 August 2022.
- If your VAT quarter normally ends in April, then your first MTD submission will be for the quarter ending 31 July 2022, which needs to be submitted by 7 September 2022, and so on.
Additionally, all of your transactions and business details must be recorded (and stored) digitally on a line-by-line basis.
Please note now there is no “opt out” option for MTD. If you are a VAT registered business you are expected to comply with MTD for VAT, unless you are “digitally excluded”.
What do I do, if this is me?
If you are already using a form of accountancy software, check if it is MTD-compliant. If it is already compliant, then you won’t need to buy any additional software. If it isn’t MTD-compliant, you don’t use any specific software or you are not sure, please get in touch with us today and we can discuss options with you. If you are for example using an Excel spreadsheet, it is possible to use a bridging software from the spreadsheet in order to digitally link to HMRC, or we can offer some cost-effective solutions to you.
Future roll-out of MTD
OK, don’t quote us on these, but here is HMRC’s current roadmap:
- Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024. There is a pilot ongoing here, as we speak;
- A consultation is on-going on Corporation Tax, but HMRC have confirmed it will not be mandatory before 2026.
We will of course keep you updated as this evolves.
How can B&W help me?
We offer software implementation and training on any of the above mentioned bookkeeping software and many others besides. We can help train you and your team to do this yourselves, be at the end of the phone to help you with any queries or we can do it all for you; depending how you want things to operate. We can also change our service offering for you as your business evolves.
Even if you are not caught out by the 1 April 2022 deadline, but want to future proof your business, please get in touch with us today and we can develop a plan. We even have specific solutions for landlords.
If you think you need further information to make sure you don’t get caught out or find out how our specialist tax team can help you, contact Black and White Chartered Certified Accountants today, or call us on 0800 140 4644.
