Next Steps for Making Tax Digital
Making Tax Digital (MTD) was launched in April 2019 for VAT. Now, hundreds of thousands of VAT-registered businesses who are above the VAT threshold of £85,000 are recording and reporting their accounts digitally to HM Revenue & Customs (HMRC).
The first reporting dates for MTD for VAT begin in July 2019, continuing quarterly dependent on the business’s required reporting dates.
Firms with more intricate VAT affairs have been given more time to submit their first reports, with a deadline of October 2019. By October, all VAT-registered businesses must comply, including some charities and public sector bodies.
Businesses are currently benefitting from a ‘soft landing period’, lasting up to a year, to ensure that MTD for VAT is in place and companies are reporting their affairs accurately to HMRC without facing penalties.
Income Tax and Making Tax Digital
Other forms of tax such as Income Tax and Corporation Tax were initially intended to follow on from the VAT requirements for April 2020 at the earliest.
However, the Government then included an amendment in a Written Ministerial Statement which confirmed that MTD for other forms of taxation would be delayed until at least April 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, including sole traders with income from one or more business, as well as income from letting UK property.
HMRC are currently in the process of testing and releasing information on software and the options for Income Tax.
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 for full implementation of MTD has been delayed, it is pivotal that businesses and individuals begin reviewing their systems and processes to ensure they are ready for the landmark move for taxation.