• Update on Making Tax Digital

    Since April 2019, most VAT-registered taxpayers with a taxable turnover above the VAT threshold of £85,000 have been required to operate Making Tax Digital for VAT.

    Over 1.4 million taxpayers have signed up, with over 6 million returns submitted. This includes the 30% of VAT-registered businesses with turnover below the VAT threshold who have joined voluntarily.

    Evidence to date indicates that the anticipated benefits of Making Tax Digital are being realised, such as fewer errors, with further evaluation planned.

    In July 2020, the Government announced a series of reforms to Making Tax Digital, captured below. HMRC have ensured these changes have long lead-in times to help agents, businesses and the wider market to make the necessary preparations in good time.

    These measures constitute part of the Government’s long-term plans for the tax administration reform of the United Kingdom, designed to improve the system’s resilience, effectiveness and support taxpayers. The 10-year strategy for building a trusted, modern tax administration system can be found on GOV.UK.

    Making Tax Digital for VAT: If you are a VAT registered business with a taxable turnover above £85,000, you must follow the rules for Making Tax Digital for VAT unless:

    Your business uses the VAT GIANT service – HMRC will contact you to tell you when the deadline is.

    You applied for or already have an exemption

    From April 2022, all VAT registered businesses must follow these rules regardless of turnover for their first return on or after 1 April 2022.

    These businesses are already able to sign up voluntarily to experience the benefits of Making Tax Digital has to offer. For more information, go to GOV.UK.

    Making Tax Digital for ITSA (income tax self-assessment).

    If taxable turnover from your client’s self-employed business or income from property is above £10,000 PA, your client must follow the rules for Making Tax Digital for the next accounting period starting on or after 6 April 2023.

    HMRC will also be expanding the pilot service for Income Tax from April 2021, to allow more businesses and landlords to test the full end-to-end service. For more information go to: GOV.UK.

    Making Tax Digital for Corporation Tax

    HMRC are continuing with their ambition to introduce Making Tax Digital to incorporated businesses with Corporation Tax obligations. They will be consulting in the autumn on the detail of this plan.

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