Business owners at risk of penalties in digital tax overhaul
Making Tax Digital will require tax returns to be submitted every three months, as opposed to the current annual tax return. Over the next five years, it will expand to include income tax and corporation tax, as well as VAT.
More than 2m SME owners are at risk of falling foul of the new digital bookkeeping rules and procedures ahead of Making Tax Digital (MTD) for VAT reform coming into force in 2022
To keep track of their accounts, more than a third of entrepreneurs (37%) utilise paper-based systems or a collection of images, with one in ten saving important documents in an old shoebox or drawer.
The survey of 1,200 entrepreneurs and business owners found that two-fifths of business owners have failed to claim expenses due to physical lost receipts and invoices.
It also found that the majority of entrepreneurs were making use of accounting or bookkeeping software to manage their businesses expenses but 37% were not.
Do VAT-registered business have to sign up for Making Tax Digital (MTD)?
As part of HMRC’s efforts to become one of the world’s most digitally advanced tax administrations and to make tax easier for business owners, digital tax records will be mandatory for all VAT registered businesses from 1st April 2022. They must also use a compatible software package that connects to HMRC systems. If more than one software package or spreadsheet is used, it must be digitally linked.
In this day and age, there are so many excellent digital record-keeping options available to business owners and freelancers that keeping paper or spreadsheet-based records should be a thing of the past. Records kept digitally will give SMEs a much clearer, accurate, and more up-to-date picture of their finances and tax owed, which is why HMRC is going to enforce it from next year.’
According to research, the new system will force millions of business owners to change the way they store their records, and those who are inexperienced with the procedures may face fines once the new laws are implemented.
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If you are a self employed, business owner/director of company looking to get your accountancy and taxation matters sorted, look no further. We, at Naail & Co, are pro-active and easily accessible accountants and tax advisors, who will not only ensure that all your filing obligations are up to date with Companies House and HMRC, but also you do not pay a penny more in taxes than you have to. We work on a fixed fee basis and provide same day response to all your phone and email enquiries. We will also allocate a designated accounts manager who would have better understanding of your and business financial and taxation affairs. Book a free consultation call using the link below.
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MTD for income tax delayed by a year until 2024