Extension of Making Tax Digital Countdown Begins
The government recently announced an extension of HMRC’s Making Tax Digital (“MTD”) programme following a pause to allow for Brexit delivery.
Since MTD was introduced in April 2019 for VAT, over 1.4 million businesses above the £85,000 VAT threshold have been submitting their quarterly VAT returns digitally.
The government always planned to extend the reach of MTD so from April 2022, the programme will cover all VAT registered businesses with turnover below the £85,000 VAT threshold, and from April 2023, it will also apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 per annum.
5th August 2020
Chris Bowles See profile
Chris Bowles, a Director at Old Mill’s Wells office comments ‘The £10,000 figure is a relatively low threshold and will bring into the MTD regime many individuals who might be largely unaware of MTD, including property landlords and micro businesses.’
‘One initial concern is that we anticipate many small businesses won’t have kept digital records, so they’ll need to invest in software to become MTD compatible; this will inevitably increase their costs. Businesses and landlords will switch to sending quarterly summaries to HMRC, which, should help with cash flow planning for tax payments and should also streamline tax compliance in the longer term.’
‘In setting out this roadmap for MTD now, the long lead-in time will enable businesses and landlords time to plan. It’s also anticipated that once digital reporting is fully embedded it will significantly reduce the amount of time businesses will need to spend on their tax affairs, which can only be a good thing.’
In an accompanying press release, Financial Secretary to the Treasury, Jesse Norman, confirmed that, ‘Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.’
Chris Bowles goes on to say ‘It’s clear which way the direction of travel is heading with the personal tax return as we know it’s becoming a thing of the past. Looking at the wider picture, the government also confirmed that it will consult in the autumn on the detail of extending MTD to incorporated businesses with corporate tax obligations.’
Chris Bowles concludes by saying: ‘This roadmap shouldn’t be regarded as something negative because as the tax system becomes more and more automated, with cloud accounting software becoming pivotal in this transition, then this will open up big opportunities for us as advisers to provide our clients with greater insight and support by utilising the real-time data they have in the cloud.’
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