Making Tax Digital programme to be extended
Tuesday, 28 July 2020
On 21 July 2020, the Government revealed the next steps in its plans to modernise the tax system so it will be fit for the 21st century, known as Making Tax Digital.
At present, Making Tax Digital is a requirement for businesses above the VAT threshold of £85,000. These businesses must keep digital records and submit their VAT returns through compliant software. This was introduced in 2019, and since then, over 1.4 million businesses have joined the Making Tax Digital programme.
The Government has now announced that from April 2022, the Making Tax Digital programme will be extended to all VAT registered businesses (above and below the current threshold). Then from April 2023, Making Tax Digital will be extended further to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually.
Is this such a bad thing?
Making Tax Digital was introduced to modernise reporting processes and assist in minimising avoidable mistakes. These mistakes were reported to cost the Exchequer £8.5 billion in 2018-19.
Furthermore, it’s reported that over 30% of smaller VAT-registered businesses, who are currently not required to submit their VAT returns through the Making Tax Digital portal, have voluntarily chosen to do so because of the wider benefits, including fewer errors and increased productivity.
Benefits of Making Tax Digital software
As you may have read in my recent blog, I find the benefits from the compliant software and third party add-ins to be a business owner’s saviour. From instant access via the cloud anywhere at any time, the Making Tax Digital software processes your receipts and invoices for you; tools to help you save time on the administration or organisation and filing of your business accounts and taxes.
It’s not just a tool for data entry; there are planners, time recording features, mileage tracking, invoicing and debt chasing functionality, cashflow forecasting, bank feed integration and much more. I could continue for hours on the software’s capabilities, all designed to save you time and help you make money.
With Receipt Bank (a data extraction tool) alone, some small businesses have saved 120 hours of annual financial administration. We currently offer this at no extra cost to all our clients where we have the billing relationship with the software QuickBooks or Xero.
For those of you who are currently under the required VAT threshold, I would suggest you make the move to Making Tax Digital as soon as possible to take advantage of the benefits. We can help you with the process, with set-up of the software and discounted pricing, training and support on how to make the most of your Making Tax Digital software.
We’ve been waiting for a long time on the Government’s plans for Making Tax Digital and corporation tax, and we’ve now been advised that there will be a paper published in the autumn for this.
It’s not going away
Some may have thought at the start of the Making Tax Digital programme that there would be a u-turn, but this is not the case. The Government’s plan states: “Taxpayers should be able to view their tax position and tell HMRC anything it needs to know through a single online account.”
We’ve helped many of our clients to get into the routine of daily bookkeeping and to benefit from real time information. The feedback we’ve had is that it’s extremely useful for:
Making key decisions using accurate, up-to-date information
Loan applications during the COVID-19 pandemic
Forecasting the business cashflow position
Knowing the VAT liability or refund position on a daily basis
Being able to submit VAT returns on compliant software in a couple of clicks
To find out more or if you have any questions please contact Ryan Ebbage or your usual contact at MHA Larking Gowen. You can find contact details on the Our People section of the MHA Larking Gowen website. Alternatively, call 0330 024 0888 or email firstname.lastname@example.org