The Government’s Making Tax Digital (MTD) programme may have stalled temporarily through Brexit and Covid 19, but in yesterday’s written statement from Jesse Norman, Financial Secretary to the Treasury, it confirmed a new roadmap for digitisation and modernisation of the tax system.
Since April 2019 most VAT registered businesses trading over the £85,000 registration threshold have been required to operate MTD, keep digital records and submit their VAT returns through a digital platform. About 1.4 million businesses nationally are now doing this, including 30% of businesses trading below the registration threshold who have signed up to MTD for VAT voluntarily.
Under the new roadmap, the Government intends to legislate so that all VAT registered businesses will be required to operate MTD for VAT from April 2022.
According to the statement, MTD for Income Tax Self Assessment will be introduced for self-employed traders and many landlords from April 2023, with a pilot scheme coming into play from April 2021 so that taxpayers can sign up early, should they wish. It is thought that around 4 million small businesses and landlords with annual turnover above £10,000 will be affected by this requirement.
There will also be a consultation this Autumn on MTD for Corporation Tax.
Our view: although the timescale and scope of MTD has shifted around a lot, the direction of travel on this is clear; almost all businesses – and all taxpayers – are going to have to accept and embrace the move to digital. The impact of Covid 19 on the public finances will only increase the Treasury’s motivation to collect more tax, earlier on; MTD is designed to achieve exactly that end, whilst also reducing HMRCs operating costs.
Businesses who will be affected by the April 2022 MTD for VAT mandate would be advised to:
- Assess their current ability to comply with the requirements, particularly on digital record keeping, and identify any gaps;
- Start planning to address those gaps now, by (for example) moving over to MTD compliant bookkeeping/ VAT filing software;
- Consider signing up to MTD voluntarily before the April 2022 deadline, rather than at the ‘last minute’.
Startups would be advised to factor MTD for VAT compliance into their plans from day one.
Contact us for assistance with your preparations for MTD; if you'd rather offload the burden of bookkeeping and VAT compliance altogether, we do also offer a fully outsourced bookkeeping and VAT service.