The next few years will see several significant changes to taxation, including, more immediately, the further expansion of Making Tax Digital (MTD) for VAT in April this year.
It is one of the key areas of the HM Revenue & Customs (HMRC) strategy to make its revenue collecting system the most efficient in the world.
What is Making Tax Digital?
- HMRC’s plan to digitise the tax system.
- Requires businesses and organisations to use HMRC-compliant software.
- Reporting must be done quarterly.
Hasn’t MTD for VAT already got underway for some businesses?
- Businesses above the £85,000 registration threshold have had to comply since April 2019.
- Many underestimated the preparation that were necessary.
- They had an initial soft-landing period which ended in 2020 – new businesses no longer get this.
What is changing in April? And who will be affected?
From April 2022, the regime is extended to ALL VAT registered organisations, including those below the threshold that voluntarily registered.
They must follow the same rules that organisations currently within the regime follow, including using HMRC-compliant software to report and record VAT information quarterly.
What do businesses need to do to prepare for this?
Businesses/organisations need to implement systems that can report and record information each quarter within the rules set out by HMRC. The software must be able to:
- Keep records in a digital form
- Preserve digital records in a digital form
- Create a VAT or tax return from the digital records held in functional compatible software and provide HMRC with this information digitally
- Provide HMRC with VAT and tax data voluntarily
- Receive information from HMRC via the API platform.
They must ensure that they continue to submit this information each quarter and produce an annual return as well.
It is important to keep on top of the changing tax landscape. Nobody wants to pay too much tax or be penalised for falling foul of new rules.
To keep your affairs in order and minimise your tax bill, get in touch today!
