From a total 1.2 Million businesses, there are 1.17 Million which are still to sign up to Making Tax Digital for VAT; with only a month to go. According to HMRC, however, 2,000 businesses are signing up daily.
What is Making Tax Digital?
Making Tax Digital plays a big part in the government’s plans to make it easier to ensure individuals and businesses get their tax correct and keep on top of their affairs. This means tax administration will be:
• more effective
• more efficient
• easier for taxpayers to get their tax right
30,000 businesses have now signed up to this new service. HMRC are currently urging the remaining 1.17 Million businesses to sign up to Making Tax Digital. HMRC have written to every business informing them that they must sign up to the scheme, they have provided information on what to do.
Starting the Scheme
Making Tax Digital launched to the taxpayers first in April 2018. Though this was a pilot, technical testing and focuses on the programming were carried out first to eliminate the chances of glitches occurring.
HMRC has outlined how to prepare for Making Tax Digital:
• Find out if your business is affected by Making Tax Digital
• Talk to your accountant, if you have one, regarding how they are making returns that comply with the new scheme
Most businesses above the VAT threshold will need to digitally store their records and submit their VAT returns using Making Tax Digital for VAT periods from 1st April. However, it will not be mandatory for companies to file their first VAT returns digitally until 1st July at the earliest. HMRC have confirmed that they will approach businesses with a soft penalty during the one-year soft landing, which will be active until April 2020, before companies will be required to use Making Tax Digital; though this depends on the type of classification of the business.
VAT registered individuals and businesses have been warned by the Low-Income Tax Reform Group that they do not have long left to be excluded from the Making Tax Digital. However certain VAT registered people or businesses may be exempt from Making Tax Digital, with HMRCs approval, if they have reasons such as age, disability or location. To be exempt, they must contact HMRC VAT, either through their helpline or send a letter to the VAT written enquires team, stating the reason it will not be possible for them to complete Making Tax Digital. This claim will then be considered by HMRC and the taxpayer will be informed whether they were successful: if not they have the right to appeal this decision.