Advice for Swindon businesses filing digital VAT returns under Making Tax Digital

By Swindon Link - 30 June 2022

Expert Voices

There are many things that any small business owner has to consider beyond their core activities and the products or services they offer. There may be issues to deal with, such as cashflow, marketing and human resources. It’s also important to keep accurate financial records – not only to assist with future planning and day-to-day operations, but also to make sure that your tax affairs are in order.

VAT can be a particular headache for many small businesses. Using a suitable VAT software solution such as Sage can make the whole process a lot more streamlined and manageable, however. Whether you need to select the right VAT rate, setting how often you need to apply it, running reports or submitting returns, having the right accounting software in place can help to eliminate mistakes and make your VAT accounting much easier. It can also help you to comply with new Making Tax Digital (MTD) regulations.

 

What is Making Tax Digital?

 

Making Tax Digital, as the name suggests, is the Government’s scheme to make the UK’s tax reporting regime entirely digital. This involves regular quarterly reporting, and the Government says that the scheme will help businesses and individuals to get their tax right and stay on top of their tax affairs.

 

Making Tax Digital is being introduced in stages. Some businesses have already been using it for some time now and VAT-registered businesses with a taxable turnover below £85,000 are required to follow suit with their first VAT return after 1st April 2022. Other taxpayers including self-employed sole traders and landlords with rental income of more than £10,000 (or a combination income of more than £10,000 from sole trading and rent) will have to follow the rules for Making Tax Digital for Income Tax from their next accounting period starting on or after April 2024. Making Tax Digital for Corporation Tax won’t become mandatory until at least 2026, but businesses in Swindon of all types and sizes should be aware of their reporting obligations and the timetable for relevant changes.

 

Making Tax Digital for VAT

 

HMRC has addressed a number of concerns and Making Tax Digital for VAT myths. There have been claims, for example, that Making Tax Digital won’t actually do much to reduce errors. According to HMRC, this is not the case. A YouGov poll had previously found that 61% of businesses had lost receipts and made errors in manually carrying out calculations and transposing data. An independent evaluation of the impact of Making Tax Digital for VAT also found that businesses that used fully integrated tax and accounting software actually spent less time on their tax than previously.

 

It’s also worth remembering that while there are definitely benefits to adopting Making Tax Digital practices and software, there are also penalties if you do not. Failing to comply with Making Tax Digital or missing a submission will result in a default, and an accumulated point system could see the business hit with automatic fines. There may also be fines and interest applied for submitting incorrect VAT figures.

 

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