Earlier in the summer HMRC released an update outlining the new roadmap for Making Tax Digital. Currently, only VAT registered entities trading above the VAT registration threshold have had to worry about MTD and for most part, that new regime has now bedded into most businesses concerned.
So, where are we now and what do business have to look forward to?
Making Tax Digital – VAT
For businesses already within MTD for VAT, for return periods beginning on of after 1 April 2021, the soft-landing period for digital links will come to an end. This means that those entities still relying on a manual link between systems have just a few months to implement an all new all-digital link. The soft-landing period was originally intended to come to an end in April 2020 but was extended by a further 12 months due to the Coronavirus pandemic.
New to the table however, from April 2022, VAT registered entities trading below the VAT registration threshold will also be required to follow Making Tax Digital rules. There is currently no lower exemption limit although businesses in this category would likely have the option of deregistering for VAT all together.
Making Tax Digital – Income Tax
MTD for income tax, delayed from its initial roll out date of April 2018, is making a comeback for self-employed businesses and landlords with annual business or property income above £10,000 from April 2023.
Under the new regulations, businesses would be required to keep digital records using compatible software and submit quarterly updates to HMRC. A final declaration will replace the current tax return, where annual adjustments previously reported on the tax return would be made.
Larger unincorporated businesses who are already within MTD for VAT may find the implementation more straightforward where they have already digitised their systems. However, smaller businesses will undoubtedly find this more challenging.
Making Tax Digital – Corporation Tax
Of relief to company directors, HMRC have confirmed that they will not mandate MTD for Corporation Tax until at least 2026, although HMRC plan to work on a pilot system during this time.
This article originally appeared in the December edition of Wiltshire Business.