Making Tax Digital – Next Steps
15th January 2021
The first stage of HMRC’s Making Tax Digital (MTD) used a soft landing approach and the programme focused on VAT and imposed new requirements for digital recording keeping on VAT registered businesses and organisations from April 2019. The soft-landing period ends 31 March 2021, and after that, small businesses will join the initiative from April 2022.
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Almost eighteen months since the launch of MTD for VAT, HMRC and HM Treasury have released a report titled Building a trusted, modern tax administration system, which states:
“Making Tax Digital is the first phase of a modern, digital tax service. It allows businesses more time to maximise business opportunities and helps to foster good financial planning. This integrated approach to business administration and tax means that many of the existing paper-based or manual processes are eliminated, and time spent on administration is reduced.”
The report looks towards the next steps for the digital transformation as the government believe that “now is the right time to plan the extension of Making Tax Digital” – beginning with MTD for VAT rolling out to all UK VAT-registered businesses from April 2022.
Soft landing period
For businesses with turnover above the VAT threshold, it’s a great time to review Making Tax Digital systems and processes. Your software should be affordable with a host of features and unlimited support.
If you are struggling to comply with digital record-keeping rules, you need to get in touch with us and let us know as after 31 March 2021, HMRC are due to start penalising businesses who are not MTD for VAT compliant.
Bridging software remains a viable and long-term option for businesses looking to manage their costs by maintaining their existing digital record-keeping methods and does give us flexibility to accept digital records from multiple systems, but is unlikely to be a solution going forward when more requirements are added by HMRC. Early in the MTD for VAT rollout, it was unclear if Excel would continue to be recognised as a digital record-keeping system, however as the project has progressed HMRC has confirmed that the use of Excel will remain compliant.
HMRC will bring small businesses with turnover below the VAT threshold onto the Making Tax Digital for VAT scheme from April 2022. That means that now is the perfect time to start understanding the rules, find software, and establish processes. If you have any questions on this or are concerned you systems fall short, please get in touch now to give your business plenty of time to adjust to the MTD for VAT rules around digital record-keeping and digital links ahead of the go-live date.