UPDATE: HMRC’s Making Tax Digital to be extended to more businesses
The digitisation of business and personal accounts reporting to HMRC is coming soon for businesses below the ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - UPDATE: HMRC’s Making Tax Digital to be extended to more businesses | LandlordZONE.
The digitisation of business and personal accounts reporting to HMRC is coming soon for businesses below the VAT threshold.
It is now less than 12 months before those VAT registered businesses with turnovers below the VAT threshold will have to report following the (MTD) rules. If you fall into this category you need to start planning for MTD now.
Currently only VAT registered businesses making taxable supplies in excess of the £85,000 VAT registration threshold are mandated to comply with Making Tax Digital (MTD) rules.
Those rules require business to keep digital business records and send VAT returns using software that is compatible with MTD.
MTD for VAT is now being rolled out to all VAT registered businesses from April 2022 which may cause some businesses and the self-employed who are VAT registered but below the threshold to consider deregistering to avoid having to comply with MTD for VAT.
If you decide to do so you will need to complete Form VAT7 and account for output VAT on the market value of stock and assets still owned at the date of deregistration. This is where input VAT has been reclaimed on those assets.
There is however a £1,000 minimum which means that output VAT does not need to be accounted for where the combined market value of the assets is less than £6,000.
Unfortunately, deregistering for VAT will not necessarily avoid MTD as the requirement to keep business records digitally will be introduced for income tax from April 2023.
From then MTD for income tax will apply to businesses with gross income in excess of £10,000 a year which will include property landlords as well as traders and professionals.
The Making Tax Digital deadlines:
- April 2019: VAT-registered businesses with a taxable turnover over the VAT threshold (£85,000) need to keep digital records and submit digital VAT returns using compatible software.
- October 2019: more complex businesses such as trusts, not for profits and public bodies who were deferred need to comply with Making Tax Digital
- April 2022: MTD will be compulsory for businesses with a turnover below the £85,000 VAT threshold
- April 2023: MTD will apply to all taxpayers who file Income Tax Self-Assessment returns for business or property income of more than £10,000 a year
HMRC says that Making Tax Digital was introduced to get small businesses and the self-employed to keep and complete digital tax records and submit digital returns using compatible software. The eventual goal is for HMRC to go completely paperless.
HMRC argue that going digital will be “easier for individuals and businesses to get their tax right and keep on top of their affairs.”
In 2015 HMRC introduced the personal tax account for everyone, which can be accessed online and which is a digital tax record which makes it easier for individuals to manage their tax affairs.
Eventually, paper records will not be acceptable to HMRC and will not meet the requirements of the UK tax legislation.
When you start to use Making Tax Digital for your business and Income Tax you will need to use appropriate software approved by HMRC. This lets you send Income Tax updates to HMRC and keep records of all your income and expenses.
If you’re already using software to keep records, you need to check if your software has been approved, otherwise you will need to transfer your existing accounts to a software package that is compatible with Making Tax Digital.
©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - UPDATE: HMRC’s Making Tax Digital to be extended to more businesses | LandlordZONE.