Making Tax Digital… Are You Filing Correctly?
The Making Tax Digital deadline for many businesses has already come, with the crossover being the biggest change to the administration of the tax system for many years. For many businesses, the change has provided confusing and expensive action. Whilst April 2019 saw the soft implementation of the VAT aspects, where those earning over the threshold must begin to adhere to the regulations. It is highly suggested to now begin following the digital methods as soon as possible, so that any issues can be sorted before it becomes a fineable offense. The full Making Tax Digital implementation happens in April 2020.
We want to take this opportunity to break down some of the key aspects that businesses need to be considering prior to the Making Tax Digital deadline…
VAT Registered: Businesses with a turnover of £85,000 are already required to be digital; whether they submit monthly or quarterly. Whilst businesses with a turnover lower than this threshold have extra time, as previously suggested, early adoption is advised. The current online VAT return will not meet the requirements.
Income Tax: (self-employed, partnerships, trusts and landlords who complete self-assessment tax returns) MTD is expected to become mandatory for income tax reporting, but not before 2020.
Corporation Tax (limited companies): The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.
There are exemptions for those who are not able to engage digitally for religious reasons or due to a factor such as age, disability or location (eg, no availability of broadband). These exemptions are the same as the current exemptions for VAT online filing.
VAT registered businesses with a turnover of less than the VAT threshold (ie, businesses who have registered voluntarily) will initially be exempt from MTD VAT reporting but this exemption may be removed from 2020 or later.
When MTD for income tax becomes mandatory there will be an exemption for businesses and landlords with a very small turnover; the level of this exemption has not been set.
Stay In The Know
Being prepared for delays and issues will be key, staying up to date with the latest HMRC updates will help you to stay on track and be aware of any difficulties that you may encounter throughout the process.