Making Tax Digital
Almost everything can be done using the internet these days, from renewing a vehicleâ€™s road tax to ordering business stationery. There is a computer in almost every home. This new digital era has had a large influence on how data is stored and transferred between either companies or individuals, and HMRC is adapting to this new age of technology. Making Tax Digital is intended to eliminate the ability for VAT and Tax returns to be submitted on paper, so that submissions can be efficiently made online.
Currently, Making Tax Digital has only been rolled out for VAT submissions so far; some businesses received a deferral letter informing them they are enrolled from October 2019, but if a VAT registered business did not receive this letter then they are compliant for Making Tax Digital. The service for self employed individuals and landlords will come into effect no earlier than April 2020, although there is a voluntary sign up available for those wanting to start sooner.Making Tax Digital requires the use of online bookkeeping software that is compatible with HMRC; a full list of the many software brands is available on HMRCâ€™s website. Every 3 months, a report is required to be sent to HMRC via this software to calculate VAT tax due and self-assessment tax due.
Many self-employed individuals and landlords are familiar to the self-assessment tax return that they need to have completed and sent to HMRC by the 31st January each year. Once Making Tax Digital begins, the tax returns will be gone, and replaced by the 3 months report. The idea of a more regular report is that the individual can view estimates of the tax bill as they year goes on, and to be able to make payments towards this amount. At the end of their accounting year, the total tax is calculated with any personal income (i.e. a part time job, bank interest, etc) and a final figure given that the individual needs to pay to HMRC. This helps individuals plan their finances effectively with an estimate figure in mind, as opposed to waiting for the final tax calculation for their amount, and to make suitable contributions. The total tax is still due to be paid by the 31st January of the following year.
There are, of course, people who cannot use a computer. HMRC do allow exemptions for those living in locations where internet access is not available, or if you have a disability that disallows you from using a computer for the duration of time to upload digital information. You would need to contact HMRC yourself and put your case forward to exempt you from making digital reports. In these cases, HMRC will allow you to submit returns the way you have previously done. And exemption may be given if you are unable to use a computer due to your age impacting your abilities or religious beliefs against electronic devices if you currently do not use a computer in your life. HMRC will consider the extent that these impacts your aptitude for digital bookkeeping and reporting.
Making Tax Digital, VAT Returns, bookkeeping, reporting