Take the digital approach
Accountants at a Shropshire firm are calling on taxpayers to sign up to the HM Revenue and Customs initiative – Making Tax Digital – sooner rather than later.
HMRC have set out their roadmap for the nationwide roll-out of the scheme and taxpayers across the UK need to be prepared.
Martyn Bramwell, tax department manager at Dyke Yaxley Chartered Accountants, in Shrewsbury and Telford, called on businesses to embrace the changes to the VAT system as soon as they could.
“Making Tax Digital started in April 2019 for the majority of VAT-registered businesses with taxable turnover over the £85,000 threshold.
“And from April 2022, it will become compulsory for all VAT-registered businesses to report their income in this way, so it makes sense to start preparing now for the new rules rather than leaving things until the last minute.”
Martyn said the initiative meant that all VAT-registered businesses would need to keep their VAT records digitally.
“You can do this by taking pictures of records on a smartphone and keeping a spreadsheet – you’ll then need bridging software to ‘talk’ to HMRC’s systems. Or you could use a dedicated software package, or a combination of both methods.”
HMRC has also confirmed that from April 2023, MTD for income tax will apply for unincorporated businesses and landlords with a gross turnover of over £10,000.
“If you have a business and a rental property, HMRC has ruled that the gross income of £10,000 is for both business and rental incomes combined, not £10,000 for each, so more taxpayers will be caught by the real-time reporting requirement,” said Martyn.
“Taxpayers will have to report on their income and expenses quarterly, and then file a submission at the end of the year finalising their business details. They will also be required to add non-business information such as bank interest, dividends, and pension contributions.”
Martyn said although reporting will be quarterly, HMRC had confirmed there were no changes to the deadlines for the payment of tax – but that could change.
“Although April 2023 seems a long way off, perhaps the new tax year starting in April 2021 is a good time to start thinking about making the change to digital records if you haven’t already done so.”
