As we’ve explored in our previous blog posts, it is clear that Making Tax Digital is going to dramatically change the way that tax is reported in the UK. However, it’s not just the way that businesses and individuals will report their tax that is changing, but also what information HMRC requires. We thought we’d take a look at what will change for businesses and individuals in the scheme.
For those individuals who file an annual tax return, the good news is that now all of the relevant details will be viewed through a centralised system. HMRC will use specific programs to collect details from employers and banks and feed it into individual accounts, providing a tailored experience for each individual and reducing the amount of information that needs to be submitted. All of your tax information will be viewed in one place, which means every individual should be aware of what is owed and what is due.
For VAT registered businesses already in the scheme, Making Tax Digital now allows them to submit additional information to HMRC when previously they could not. This additional information will be limited to a specific data set of supplementary information which should include a split of the outputs value between the varying rates of VAT and adjustments to input and output figures. While the legal status of any supplementary data is still to be clarified, it is known that while errors to this data must be corrected, they will not incur a penalty. The rules for amendments will remain in place (which is that amendments and error corrections below a certain threshold can be made on the next VAT return or a VAT 652 form submitted) but businesses will need to ensure that changes requiring separate disclosure are excluded from the digital return.
Businesses with a turnover of less than the current VAT threshold of £85,000 but who voluntarily submit a VAT return are not yet required to comply with the Making Tax Digital reporting and recordkeeping obligations. With no set date for these businesses to enter the scheme, the current method of online filing of VAT returns stays in place, and while they can choose to opt-in to Making Tax Digital, until it is rolled out to encompass all business, there will remain an option to withdraw from the scheme.
We hope you’ve enjoyed our Making Tax Digital blog series. If you’d like to read our other posts, just browse through our blog. As always if you have any questions on how we could help with Making Tax Digital or other accounting related issues, just drop us a line at firstname.lastname@example.org