Last updated on April 4th, 2022 at 12:41 pm
Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years. This change might seem daunting, but we’ve compiled everything you need to know so your journey into digital tax recording is as easy going as possible.
Making Tax Digital for VAT
All VAT-registered businesses from April 2022 are required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns, this applies to all businesses who were previously below the £85,000 threshold.
Making Tax Digital for Income Tax
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024.
Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self-Assessment tax return.
Making Tax Digital for Corporation Tax
The government has published a consultation on the future design of Making Tax Digital for Corporation Tax and welcomes views from companies and other organisations within the charge to Corporation Tax, agents, professional bodies and software developers.
The government will provide businesses with an opportunity to take part in a pilot for Making Tax Digital for Corporation Tax and will not mandate its usage before 2026.
What do I need to know now?
All VAT registered businesses who have not yet signed up for Making Tax Digital for VAT need to do so, to ensure a smooth transition to the new digital accounting recording requirements.
- Consider whether your business qualifies for a digital exclusion exemption.
- If you’re currently using accounting software, you’ll need to upgrade it to comply with the upcoming requirements.
- If you’re currently keeping your records on a spreadsheet, you’ll need to obtain software that will allow returns and updates to be made directly from the spreadsheets. This is not yet available and there are no details of who will be supplying this or when.
- If you’re currently keeping paper records, you’ll need to acquire and initiate the use of the appropriate software
What are the exemptions?
- Those who are not able to engage digitally due to age, disability, location (e.g. no access to broadband) or religious reasons.
Burgess Hodgson can support your business through these changes and provide you with the services that you need for a smooth-sailing transition into MTD. For more information on how we can help contact firstname.lastname@example.org or call us on 01227 454627Read More
HMRC have recently updated their guidance on Decentralised Finance (DeFi) and the tax implications surrounding this area of cryptocurrency.
What is DeFi?
DeFi is an umbrella term used to provide products akin to traditional financial services through Distributed Ledger Technology. DeFi platforms can provide services such as Decentralised exchanges (DEXs), savings, lending and derivatives.
DeFi lending platforms facilitate lending between unconnected lenders and borrowers. A lender could then be provided with a return on their loan, allowing cryptoassets to provide a source of income in addition to any increase in the capital value of the cryptoassets.
Read more here: https://www.burgesshodgson.co.uk/wp-content/uploads/defi.pdfRead More
The Partners have been discussing the ways to move the firm forward and have agreed on a new staff development structure. This will ensure the continued growth and advancement within Burgess Hodgson as well as provide an opportunity for colleagues to have a clear path for progression and professional development.
As part of the development, we are pleased to announce that Rachel Pottle and Greig Gaskill have been promoted to Directors. They have shown outstanding leadership qualities as Associates.Read More
Huge congratulations to Oliver Laughton on becoming an Associate at Burgess Hodgson! Oliver has been at Burgess Hodgson since 2012, working directly for the senior partner, Steve Sutton. Whilst managing a diverse portfolio of clients and a busy team of trainee accountants, Ollie assists with annual compliance, providing diligent tax advice to owner managed businesses along the way. Ollie feels that building strong relationships with his clients is key to advising. Ollie also has a special interest in inheritance tax planning and advice.Read More
The deadline to file and pay remains 31 January 2022. The penalty waivers will however mean that:
- No late filing penalty will be issued if filing online by 28 February
- No late payment penalty will be issued if tax due is paid in full, or a Time to Pay arrangement is set up, by 1 April
Interest will remain payable from 1 February.
The existing Time to Pay service allows any individual or business who needs it, the option to arrange to spread tax payments over time.
Self Assessment taxpayers with up to £30,000 of liability can do this online by following the below link but only once they have filed their return.
For larger liabilities clients will need to speak to HMRC directly on 0300 200 3822.
As a reminder the 2020/21 tax return must include payments under
- Self-Employment Income Support Scheme
- Coronavirus Job Retention Scheme
Burgess Hodgson recommend that wherever possible the returns should be filed by 31 January.
For more information or advice please contact Burgess Hodgson via email@example.comRead More
The next round comes in from 1 April this year, which will require all VAT registered businesses, regardless of turnover, to submit their VAT returns via MTD compliant software.
Who is likely to be affected
These changes will apply to the approximately 1.1m VAT registered businesses with taxable turnover below the current VAT threshold that are not currently required to operate Making Tax Digital (MTD) for their VAT reporting and record keeping obligations.
General description of the measure
MTD and its extension forms a crucial building block in the government’s 10-year strategy to make the tax system more resilient and effective, to boost business productivity, and support taxpayers.
These changes extend MTD requirements to smaller VAT businesses from April 2022. They build on the successful introduction in April 2019 of MTD for those VAT businesses with taxable turnover above the VAT threshold.
There is a growing body of evidence, from research and insights from taxpayers within MTD for VAT, which demonstrates that MTD is securing a range of benefits for those that use it in practice.
These benefits include reducing or eliminating paper-based or manual processes through use of software and an integrated approach to business administration and tax, allowing for greater accuracy in tax returns. This reduces the time businesses spend on administration, providing businesses more time to maximise business opportunities, productivity and profitability. MTD’s intention is that, for the majority of businesses, tax will be made easier to get right and harder to get wrong.
About a quarter of VAT registered businesses below the VAT threshold have voluntarily chosen to join MTD, demonstrating that a modern, digital approach to managing tax can work for businesses of every size.
MTD aims to tackle that part of the tax gap caused by error and failure to take reasonable care, by removing opportunities to make certain types of mistakes in preparing and submitting tax returns.
Under MTD, businesses must keep digital records and use third-party software to submit their tax returns to HMRC. Under the changes, those who do not already keep their records digitally will need to start doing so for their VAT obligations. The process of then sending returns to HMRC will become more straightforward, with their returns generated and sent directly from the software they are using to keep their records.
The software these businesses use must be capable of receiving information from HMRC digitally via HMRC’s Application Programming Interface (API) platform.
For more information or advice, please contact Burgess Hodgson via firstname.lastname@example.orgRead More
From 4 January 2022, Her Majesty’s Revenue and Customs (HMRC) will be pausing most webchat features for 3 months to review the service it is providing.
HMRC have found that the webchat works best when used for simple queries and to educate about the digital tools available on GOV.UK. Where it is not helpful is longer queries, such as tax coding issues for PAYE customers, where such queries take 84% longer via webchat compared to a phone call.
This Pause will allow HMRC to fully assess and improve the service to help customers in the most effective ways possible. While this is in effect, the following lines will still be available:
• Online Services Helpdesk
• National Clearance Hub
• Imports and Exports
• Debt Management
• Extra Support
• Support for pandemic-related activity will continue
For any advice or assistance contact Burgess Hodgson via email@example.comRead More
• Businesses in the hospitality and leisure sectors in England will be eligible for one-off grants of up to £6,000 per premises, plus more than £100 million discretionary funding will be made available for local authorities to support other businesses
• Government will also cover the cost of Statutory Sick Pay for Covid-related absences for small and medium-sized employers across the UK
• £30 million further funding will be made available through the Culture Recovery Fund, enabling more cultural organisations in England to apply for support during the winter
Existing measures referred to in the Treasury statement – These additional measures will reinforce the existing package of business support, including:
• business rates relief meaning that the majority of businesses in the hospitality and leisure sectors will see a 75% reduction in their business rates bill across the entire financial year and a new 50% capped business rates relief next financial year;
• a 12.5% reduced rate of VAT for hospitality and tourism to support the cash flow and viability of around 150,000 businesses and protect over 2.4 million jobs, until the end of March;
• the £1.5 billion Covid Additional Relief Fund for businesses that have not previously had business rates support;
• businesses will be protected from eviction if they are behind on rent on their premises, thanks to the moratorium in place until March 2022;
• access to finance for SMEs through the Recovery Loan Scheme to June; and
• Bounce Back Loan repayment flexibility, with borrowers having the option to take a 6 month repayment holiday, three 6 month interest only periods or extend their loan to 10 years, which almost halves the monthly payment.
• support for the aviation and travel sectors, including over £12 billion since the beginning of the pandemic, and the Airport and Ground Operations Support Scheme (AGOSS) until the end of March 2022.
• HMRC stand ready to support any business impacted by the coronavirus pandemic through its Time to Pay arrangement, and the Chancellor has asked them to offer businesses in the hospitality and leisure sectors in particular the option of a short delay, and payment in instalments, on a case by case basis, as part of this.
For more information or advice on business grants, please contact firstname.lastname@example.orgRead More