HMRC’s have begun the introduction of their landmark Making Tax Digital (MTD) regime. This means that tax payers will be required to move to a fully digital tax system. With the new system, businesses with a taxable turnover above the VAT threshold of £85,000 must keep digital records for VAT purposes and submit their VAT returns to HMRC via MTD compliant software.
The new rules have taken effect since 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. Some VAT registered businesses with more complex requirements will not see the rules come into effect until 1 October 2019. Businesses included in the October start date are VAT divisions, VAT groups and those using annual accounting schemes.
The government has confirmed a lenient approach to penalties will be taken during the first year of implementation. This means that if businesses are doing their best to comply with the new rules, they will not receive filing or record keeping penalties as they are focusing on supporting businesses in their transition to MTD. It has been confirmed that the government will not be mandating MTD for any new taxes in 2020.
Quote from Nigel Holland:
“Moving over to MTD may be strange for some businesses that aren’t used to computer based systems. This is where accounting firms like Holland & Co can step in and provide all the support necessary to help business owners adapt to the new rules.”