The Government has recently introduced the Making Tax Digital plan to make it easier for everyone (businesses and non) to keep on top of their taxes.
According to the Government’s website, the HMRC’s ambition is to ‘become one of the most digitally advanced tax administrations in the world’ and the plan will transform tax administration making it more:
For the majority of businesses, the change has taken effect on or after 1st April 2019.
If your business is VAT registered and its taxable turnover is above the VAT registration threshold of £85,000, you must send your VAT returns to the HMRC using a compatible software and keep digital records.
If your business is VAT registered and its taxable turnover is below the VAT registration threshold of £85,000, you are still required to send your VAT returns to the HMRC with a compatible software and keep digital records.
For a small minority of businesses, with more complex requirements, the change will take effect on 1st October 2019 and these businesses are now required to start keeping digital records and using a compatible software.
Making Tax Digital will sure make life easier, however, it might involve a few penalties you need to be mindful about.
Penalties will apply to late payments of corporation tax, income tax, capital gains tax, and VAT and penalty points will be issued in three different time periods.
Businesses will receive a points every time they fail to submit their payments on time according to the following model:
2 points for annual submission
4 points for quarterly submission
5 points for monthly submission
Penalty points will expire after a period of good compliance.
If you don’t submit a tax payment on time you will have 15 days to pay the full amount before you receive a penalty. However, if you propose a ‘time to pay agreement’ to HMRC you might escape any eventual penalties.
If you don’t submit a tax payment within the 30 days over the due date and a ‘time to pay agreement’ hasn’t been proposed, the penalty will rise to the applicable percentage.
Making Tax Digital is definitely changing the way we keep on top of our finances, making it easier for everyone to access this service at their preferred time and from the comfort of their preferred location.
How are you getting on with the switch? Let us know in the comments below.