Article by Laura Walshe of The Business Debt Advisor
Making Tax Digital is part of government plans to make it easier for individuals and businesses to get their tax liabilities correct and keep on top of their affairs.
The initiative will implement fundamental changes to the way the current tax system works, to make administration:
- more effective
- more efficient
- easier for taxpayers to get their tax right
When does Making Tax Digital start?
Effective from 1 April 2019, the majority of VAT-registered individuals and business owners will be required to keep digital accounting records and use compatible software to submit all VAT returns due after the effective date.
Compatible software must integrate with HM Revenue and Customs (HMRC) systems and;
- allow you to report VAT information to HMRC;
- allow HMRC to send information to you.
Further information can be found here.
There is a small minority of VAT-registered business with more complex requirements, and for these customers, they will have until 1 October 2019 to prepare.
Customers required to comply with this deferred date include ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups and public sector entities required to provide additional information on their VAT returns.
What do individuals and business owners need to know?
Are deadlines for VAT submissions still the same?
Yes. After the 1 April 2019 the submission and payment deadlines will remain exactly as they are at the moment.
VAT-registered individuals and business will also continue to make corrections on the following quarter’s return or by writing to HMRC.
What information needs to be submitted?
You will need to keep a record of all VATable transactions in compatible software, but HMRC only requires summary data in each submission, in the same way information is summarised on the paper return.
What information needs to be stored?
You will be required to store certain information digitally. This should include, for each supply:
- the time of supply
- the net value of the supply
- the rate of VAT charged
This information is already required for VAT returns under the current system.
There is no additional information which needs to be provided under the new scheme, but it will need to be stored digitally after 1 April 2019.
Tax updates will happen in ‘real-time’
HMRC has said that once the scheme is up and running they will provide details on an individual’s or business’s tax position in real time, or as close to real time as possible.
It is anticipated that this will help to prevent errors and enable better visibility overall.
What happens next?
Making Tax Digital will not be mandatory for taxes – other than VAT – until (at least) April 2020.
In March 2019, it was announced that the Government would focus on supporting businesses through this transition before seeking to implement similar changes in relation to income taxes or Corporation taxes.
How to deal with arrears of VAT and other tax arrears
It is imperative for individuals and businesses to keep up to date with their tax affairs, wherever possible. By doing this, you can avoid the additional cost of penalties and interest which accrues on overdue payment.
If for any reason you are unable to make payments as and when they fall due, it could be a sign that your business is experiencing financial pressure.
If this is the case it is always important to enter into early discussions with HMRC, and it could be possible to agree Time To Pay (TTP).
If you have any concerns about your ability to keep on top of your tax affairs then please fill out our Contact Form and we will be in touch. Alternatively, call us on 0800 781 0990.
Our team has extensive experience and can arrange an initial consultation at no cost, usually on the same day.