Companies and sole traders who have not yet finalised their plans to comply with Making Tax Digital need to board the last train departing this month!
The very latest you have to comply with Making Tax Digital (MTD) for paying VAT is August 7, so gather all your VAT and hurry on that train before it’s too late 🚄
Digital Tax Requirements
The August 7th 2022 is the latest date on which you will need to make your first – if you are not already doing this – MTD VAT return. So, if you have not already done so, you have very little time left to make sure you comply with this legislation.
Whether you are required to pay VAT – because your business turnover is above the £85,000 threshold at which you are required to register – or because you have voluntarily registered, you now must keep your records and file your returns electronically.
What happens if you dont?
From April 1, you will need to have filed any VAT due through MTD-compatible software, which includes the likes of QuickBooks and Xero, among others (Something Lotuswise already does 😉).
If you are not able to file your return this way, then HMRC can issue a £400 fine. Plus, from January 2023, HMRC is will bring in a points system, which means you attain points each time you miss a deadline. Once you hit a certain number of points, you will face a £200. That’s not great for any organisation, so consider MTD asap!
Income Digital Tax
The next roll-out will be the introduction of MTD for income tax which is scheduled to start in April 2024.
The obligation to keep records in a digital format and report information quarterly will apply to unincorporated businesses and property landlords with gross income from all business activities over £10,000 a year.
Businesses operating digital tax for VAT may already have ‘functional compatible software’ for income tax purposes but will need to get into a new routine for income tax reporting.
The changes will be more significant for property landlord businesses, most of whom are not VAT registered and so have not already been through digital tax for VAT.
HMRC are currently consulting on the precise details of what needs to be reported each quarter. As expected, it seems the accounting software will need to record and report income and expenditure in the same categories currently used for self-assessment.
HMRC also propose that those businesses with turnover below the £85,000 VAT threshold will only need to report the totals of income and expenditure each quarter, which will be a welcome simplification for small businesses.
Do you need help getting into the nitty and gritty details of making tax digital? Give us a call on 020 3367 1106.