Taxi drivers and other self-employed workers are looking on intrigued as new MANDATORY digital tax requirements begin to roll-out.
HMRC have today reminded businesses to take steps to prepare for Making Tax Digital (MTD) for Value Added Tax (VAT) before it becomes mandatory for all VAT-registered businesses from 1 April this year.
Last year, the Government announced that MTD for Income Tax Self-Assessment (ITSA) will be introduced a year later and will now come into effect in the tax year beginning in April 2024, in a bid to give businesses more time to prepare.
HMRC sources say MTD is designed to help businesses eliminate common errors and save time managing their tax affairs. Self-Employed workers, which includes thousands of taxi drivers, will be able to see the process and success of the roll-out, before their turn in two years' time.
The latest independent study of over 2,000 businesses found that MTD made preparing and submitting VAT returns faster for 55% of businesses surveyed and 53% of businesses felt more confident they are getting tax right. Sixty-seven per cent of businesses also felt MTD reduced the potential for mistakes in at least one aspect of the record keeping, preparing and submitting returns process.
As of December 2021, nearly 1.6 million taxpayers had joined MTD for VAT with more than 11 million returns successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have voluntarily signed up to MTD for VAT ahead of April 2022, and thousands more are signing up each week.
Since April 2019, businesses with a taxable turnover above £85,000 have already been required to follow MTD rules, keeping digital records and filing VAT returns using MTD compatible software.
As announced in July 2020, all VAT registered businesses must meet MTD requirements from April 2022, regardless of turnover. HMRC is now reminding businesses below the £85,000 threshold of the steps which they need to take to be ready and will offer support if needed.
Joanna Rowland, Director General for Transformation Group in HMRC, said: “MTD is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.
“By signing up for MTD, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs.
“We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.”
FSB National Chair, Mike Cherry, said: “We have worked hard to ensure Making Tax Digital launch dates were adjusted to give small businesses more time to prepare and allow more competition to open up in the accounting software market. It’s important that firms do all they can to get ahead of deadlines and access the affordable platforms that are now available; if they are members of FSB, they will have access to a new easy MTD member service that we are creating.
“We’ll continue to work with government, and through our support services, to minimise the admin and cost impacts of MTD on small firms whilst unlocking the productivity gains the initiative could bring.”