MEASURES REQUIRING businesses to submit and record VAT returns via digital means is to be extended to all companies from April 2022, the government announced this week.

The requirement is part of the government’s much vaunted Making Tax Digital (MTD) strategy which aims to see the end of the annual tax return and transform the tax system. The government say these reforms are “intended to make it easier to pay tax due, enhance resilience, effectiveness, and support for taxpayers”. Shipleys Tax Advisers, like most industry tax experts, are somewhat guarded about these aims.

Currently from April 2019, most VAT-registered taxpayers with a turnover above the VAT threshold have needed to operate Making Tax Digital for their VAT returns, keeping their records digitally and updating HMRC through secure software.

What’s changing?

In their announcement, the government set out the road map for the programme.

From April 2022, MTD will first be extended to all VAT registered businesses with turnover below the VAT threshold to “ensure every VAT-registered business takes the step to move to a digital tax service”.

Then from April 2023, it will be extended apply to businesses and landlords who file self-assessment tax returns for business or property income over £10,000 annually.

The government says this timetable will allow businesses, landlords and agents time to plan, while HMRC will expand its pilot service from April 2021 to allow businesses and landlords to test the full end-to-end service before the requirement to join.

What does this mean for you?

At Shipleys Tax Advisers we take most government announcements with a heavy pinch of salt. The current government has an unenviable track record of making far reaching changes with little thought and trying to do too much too quickly, it is usually the taxpayer and/or their agent/accountant who has to deal with the inevitable fall out (e.g. see the debacle around the introduction of RTI for PAYE, and more recently, the much-maligned original MTD roll-out).

So more admin, more red tape and more people being trapped by the overly complicated UK tax system. Is it all bad news then?

Surprisingly, not quite. At Shipleys Tax Advisers we have noted that, if implemented properly, there are valuable advantages to be gained with the right MTD process.

Efficiency – there is growing evidence that using software for VAT and record keeping does free up your time to focus on other aspects of your business.

Flexibility – not all taxpayers will want to be forced online. Those who run very small simple businesses the cost of digitalisation can be off-putting, however the system can be modified to accomodate a non-online solution.

Tax planning opportunities – for the serious business owner, MTD expanding should give agents room for tax planning. At Shipleys Tax Advisers, having an accountant or tax professional review your business performance regularly means avoiding unexpected tax bills and not miss tax planning opportunities.

Going forward

Much like the current pandemic, MTD will not go away anytime soon and as such taxpayers and businesses alike will need to get up to speed quickly.

Those company owners and sole traders currently behind the digital curve will need make plans to implement MTD especially if their bookkeeping is offline as well.

If you need help with MTD implementation or would like to discuss options, please call 0114 272 4984 or email us at info@shipleystax.com.

.