In case you missed our report last February about Making Tax Digital (MTD) and what it means, we wanted to remind you about the government’s latest push for a digital tax approach.
Making Tax Digital (MTD) basically means a move from all the tax and associated systems into the digital age, all records will be maintained digitally, and returns submitted through HMRC compliant software. Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is: more efficient, more effective and easier for taxpayers to get their tax right. Read below to see what HMRC penalty you could face if things are not correctly.
But what is exactly happening now?
The move towards cloud-based software has been in place since April 2022 and should now be known to many business owners. HMRC are looking to encourage compliance by issuing new penalties and is exactly asking businesses to do the following:
- You must file your VAT return using functional compatible software (HMRC penalty- up to £400 fine if submitting using incompatible software)
- You must keep records digitally (HMRC penalty- £5 to £15 per day if not submitting information digitally)
- You must use the checking functions within your software (HMRC penalty- returns filed that contains errors mean paying back any VAT that you owe. HMRC may also charge you a penalty of up to 100% of the VAT you owe)
- Register for Making Tax Digital (MTD)
The main goal is to simplify tax processes and reduce human error, so it may now be a good time to catch up on the move to the digital age. If you require any further help, your local AIMS accountant is available to provide guidance.