Making Tax Digital is the UK Government’s initiative to improve the quality and timeliness of information that HM Revenue & Customs (HMRC) receives.
The principle is that businesses’ accounting records should be held digitally and that communications between different software and HMRC should be electronic, removing the risk of re-keying and similar errors. For reports that are currently annual, such as Income Tax Self-Assessment and Corporation Tax returns, information will be sent to HMRC on a quarterly basis.
Making Tax Digital for VAT came into force for most VAT businesses from 1 April 2019. However, the rules continue to evolve, and the digital links soft landing period ends on 1 April 2021. For those businesses with VAT-able turnover below £85,000, the rules come into force from 1 April 2022.
Making Tax Digital for Income Tax is the next reporting that will be mandatory under Making Tax Digital. For businesses with turnover over £10,000, Making Tax Digital is mandatory from 6 April 2023, although it is possible to voluntarily sign up now.
Making Tax Digital for Corporation Tax is currently in consultation phase, but it has been stated that the earliest that mandatory compliance will be required is April 2026.
If you would like to discuss how this may impact your business, please get in touch with your usual Blick Rothenberg contact or James Rimell, using the contact details on this page.