Delay to Making Tax Digital (MTD)
VAT Return submissions for the quarters have been delayed by 3 months due to the COVID-19 outbreak, as per news articles last week. Now, HMRC have announced that the rules for compulsory digital submissions for all VAT Returns will be pushed back until next year.
Previously, only businesses that exceeded the VAT threshold of Â£85,000 were, and still are, required to submit online VAT submissions through cloud bookkeeping software, which is a new process known as MTD (Making Tax Digital). The change would see the same happen for businesses under the threshold; they would need to set up a digital, cloud-based record of their income and expenses in preparation and maintain this method of bookkeeping while making submissions. The announcement came with two days left until the rules would be enforced, so for many businesses they may already be digitally connected for next year.
Making Tax Digital is designed to reduce human error, such as mistyping figures or miscalculating sums, and serves as a quicker method for both uploading information on the taxpayerâ€™s part and transmitting information to HMRC. The reduction of errors will in turn help close the tax gap. The requirement to buy or subscribe to cloud-software has been a cost for businesses and tax agents alike, and the process to set up for MTD for themselves or for their clients had taken a long preparation time. Of course there were some who faced difficulties with the registration, even after MTD was officially rolled out, which became a mark against MTD, and the change from paper or spreadsheets to software bookkeeping required a few months for the change to be less overwhelming.
Cloud bookkeeping is thought to be easier as the software can connect to the business bank account and pull in the entries of the day-to-day statements. A bookkeeper would simply need to reconcile the entries and ensure the data codes are correct to ensure that the software puts the figures into the right categories. There are plenty of advice forums online for various cloud bookkeeping software so if an individual has a question, they can try searching online before picking up the phone to talk to a specialist.
It is not just VAT that MTD affects. HMRC planned to roll out a digital reporting system for income tax, in which those required to submit self assessment tax returns would submit their information on a quarterly basis. If the VAT plans have been delayed, inevitably so will the income tax intentions.
HMRC has already delayed the requirement to submit VAT reports and payments until the end of June 2020 due to the Corona Virus pandemic that has the United Kingdom in a lockdown.
The next step of MTD above is now delayed to the 1st April 2021.Tags:
Making Tax Digital, HMRC, COVID-19