In the 2015 budget, the Chancellor announced, “the end of the tax return”! Further announcements set out a timetable for digitalising income tax, Corporation Tax and VAT returns. Following consultation, the implementation for income tax and corporation tax has been delayed. However, Making Tax Digital (“MTD”) for VAT went ahead for VAT registered businesses above £85k turnover in April 2019 and for all VAT registered businesses from April 2022. But what does it mean?

All taxpayers who are VAT registered will no longer be able to type the figures for their VAT returns directly onto the template within their HM Revenue & Customs (“HMRC”) online filing account. Instead, taxpayers will only be able to submit the figures from accounting software or specially enabled spreadsheets. This includes overseas businesses, charities, local authorities, academy schools and Government Departments, as well as businesses. Only taxpayers that are averse to technology on moral or religious grounds, the elderly or infirm or those that cannot access digital technology (e.g. no internet access, national firewalls etc.) will be exempt from MTD filing. In addition to filing the VAT return figures, there are now extra record keeping requirements (e.g. a new digital VAT account) and data transferred between sources will need to be done with digital links (e.g. from accounting software to spreadsheet and vice versa or from third party sources). Further down the line, it is likely that HMRC will mandate the provision of increasing amounts of information, up to and including raw source data, although this may be a few years away. However, If you are currently using one of the accounting software packages, you should check what the provider is doing to upgrade to the MTD compatible software and what they will be charging for this. It may be time to consider changing providers or outsourcing the preparation of the VAT returns.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of November 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.