HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system, beginning with MTD for VAT. Since 2019, businesses with a turnover above the VAT threshold (currently £85,000) have been required to keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.
HMRC has recently opened a pilot service Making Tax Digital for Income Tax for self-employed businesses and landlords with straightforward affairs (i.e. those who will need to use the service from April) and the pilot scheme will be gradually extended for other businesses.
Keeping digital records and making quarterly updates will not be mandatory for taxes other than VAT before April 2021.
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“Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. Third party commercial software will be required as software will not be available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements. In the long run, HMRC is still looking to a scenario where income tax updates are made quarterly and digitally, and this is really what the VAT provisions anticipate.“Oliver Finch – Menzies Outsourcing Director
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Menzies Private Client Team
Personal tax planning can be complex. We would always recommend that you seek professional advice when undertaking a review to ensure all changes are processed and managed effectively. Please do speak with your Menzies contact who will be delighted to meet with you to discuss ideas, opportunities and the appropriate action.