By Katie Business News • Making Tax Digital • Tax News 0 Comments

Making tax Digital for income tax coming soon

Making tax Digital coming soon for income tax:

VAT registered business making taxable supplies above the £85,000 registration threshold have been grappling with Making Tax Digital (MTD) since April 2019. The next roll-out will be the introduction of MTD for income tax which is scheduled to start in April 2023.

The obligation to keep records in a digital format and report information quarterly will apply to unincorporated businesses and property landlords with gross income in excess of £10,000 a year. Businesses operating MTD for VAT will already have MTD compliant accounting software but the extension of MTD to income tax will mean a major change for property rental businesses who are outside of the current rules.

There are a number of MTD compliant accounting software packages that you might wish to consider and we can of course advise you on the one that is most appropriate for your business. There are even relatively cheap software packages specifically designed for property rental businesses.

INFORMATION IN QUARTERLY MTD FOR INCOME TAX REPORTS

The precise details of what needs to be reported each quarter have yet to be finalised, but the categories of income and expenditure are likely to be the same as currently reported for self-assessment.

The accounting software will need to record income and expenditure into the following main categories:

  • Turnover/gross rents
  • Costs of goods sold
  • Materials
  • Wages and salaries of employees
  • Sub-contractor costs
  • Rent, rates, power, insurance
  • Repairs and renewals
  • Professional fees
  • Telephone and other office costs
  • Interest on bank and other loans
  • Motor and travel expenses

It is unclear at this stage how loans to finance residential lettings will be reported as those costs are no longer deducted in arriving at rental profits as relief is now given by way of a basic rate tax deduction.

TIMING OF MTD FOR INCOME TAX REPORTS

It is currently proposed that there will be 4 quarterly reports to HMRC followed by a finalisation return when end of year adjustments will be made. For a buy to let business that would mean quarterly returns made up to 5 July, 5 October, 5 January and 5 April. There would then be a MTD finalisation submission the following 31 January.

ABOLITION OF BASIS PERIODS AND NEW TAX YEAR END?We are awaiting further information on MTD from HMRC this summer but one significant announcement on 20 July was draft legislation to abolish basis periods for unincorporated businesses for the 2023/24 tax year to simplify MTD reporting.

That change would apply to sole traders, partnerships, as well as trusts with trading and property rental income. There would also be complicated transitional rules for 2022/23 which could result in a big tax bill that year for some traders.

The Treasury are also consulting on changing the tax year itself from the archaic 5 April year end to 31 March or even 31 December. A calendar tax year would bring the UK into line with most other countries at last!

We will keep you updated when more information comes available.

Need more information?

We offer a wide range of services which are unique to your business and will guide you through making tax digital. Our team of chartered accountants have a wealth of experience in a broad range of sectors and our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

Contact us below

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    By Katie Making Tax Digital • Tax Advice • Tax News 0 Comments

    Making tax digital now extended to more businesses

    Currently only VAT registered businesses making taxable supplies in excess of the £85,000 VAT registration threshold are mandated to comply with Making Tax Digital (MTD) rules. Those rules require the business to keep digital business records and send VAT returns using MTD-compatible software.

    MTD for VAT is now being rolled out to all VAT registered businesses from April 2022 which may cause some traders who are VAT registered but below the threshold to consider deregistering to avoid having to comply with MTD for VAT. If you decide to do so you will need to complete Form VAT7 and account for output VAT on the market value of stock and assets still owned at the date of deregistration. This is where input VAT has been reclaimed on those assets.

    There is however a £1,000 de-minimis which means that output VAT does not need to be accounted for where the combined market value of the assets is less than £6,000.

    Unfortunately, deregistering for VAT will not necessarily sidestep MTD as the requirement to keep business records digitally will be introduced for income tax from April 2023. From then MTD for income tax will apply to businesses with gross income in excess of £10,000 a year which will include property landlords as well as traders and professionals.

    Need more information?

    Do you need more support  with the Making Tax Digital (MTD) rules.

    We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

    Our fantastic team at A&C Chartered Accountants are here to help.

    Contact us below

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      By Katie Making Tax Digital • Tax Advice • Tax News 0 Comments

      MTD for VAT to be extended to all VAT registered businesses in 2022

      Since 2019, the vast majority of VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) have been mandated to keep digital VAT records and send returns using Making Tax Digital (MTD)-compatible software.

      From April 2022 these requirements will apply to all VAT-registered businesses.

      It has also been announced that MTD for Income Tax Self-Assessment (ITSA), which was originally intended to start in 2018, will finally be introduced from April 2023 for unincorporated businesses and landlords with total business or property income above £10,000 per year.

      Most businesses will have 2 years to prepare and test the service voluntarily prior to its introduction.

      Need more information?

      We offer a wide range of services for VAT registered businesses. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want VAT advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

      Our fantastic team at A&C Chartered Accountants are here to help.

      Contact us below

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        By Katie Business News • Making Tax Digital • Tax News 0 Comments

        Making Tax Digital: apply for more time for digital links

        Making Tax Digital Update:

        For VAT periods starting on or after 1 April 2020 (or 1 October 2020 for deferred businesses) your accounting systems must use digital links for any transfer or exchange of data between software programs, products or applications used as functional compatible software. That is the end of the current 12 month “soft landing” extension.

        Businesses with complex or legacy IT systems may require a longer period to put digital links in place. These businesses can apply to HMRC for additional time to put the required digital links in place. If your business qualifies then the additional time will be granted as a specific direction from HMRC.

        If, for example, your company purchases another business it may take additional time to digitally link different software applications or packages to meet the MTD legal obligations. HMRC will consider an application to extend the digital link deadline longer than the “soft landing” period.  That would mean the businesses would continue to be able to “cut and paste” during the extension period.

        Need more information?

        Having a dedicated tax specialist accountant is hugely beneficial. We are on hand to help with new and existing clients who need any support throughout the process. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

        Our fantastic team at A&C Chartered Accountants are here to help.

        Contact us below

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          By Katie Business News • Making Tax Digital • Tax News 0 Comments

          No VAT penalty if you missed the first quarterly MTD deadline

          If you pay your VAT quarterly by direct debit the sign-up window has closed for the 7 August (30 June quarter) submission. Do not worry as HMRC have announced that you will not be penalised this time so you may file the old way and come back when the direct debit has been collected to sign up in time to file the next return.

          Although HMRC will not penalise you, they will send a letter telling you that you missed the deadline and asking you to take action.

          Making Tax Digital for Business

          Making Tax Digital was introduced in the 2015 Spring Budget. The government’s ‘Making Tax Easier’ document was published shortly after and outlined plans for the ‘end of the tax return’. It also set out the government’s vision to modernise the UK’s tax system, with digital tax accounts set to replace tax returns for businesses.

          Making Tax Digital for VAT

          From 1 April 2019, businesses are mandated to use the Making Tax Digital for Business system to meet their VAT obligations. Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

          Company officers jointly and severally liable for VAT penalty

          The decision in a recent tax tribunal case reminds us that directors and other company officers may be personally liable for VAT penalties of their company. The recent case involved a penalty for late registration for VAT where the threshold had been exceeded.
          Three conditions must be satisfied before the liability for a penalty payable by the company can be imposed on an individual:

          1) A penalty must be payable by the company for a deliberate failure.

          2) The individual on whom HMRC seek to impose liability must be an “officer” of the company

          3) The deliberate failure must be attributable to that officer.

          Our dedicated team of chartered accountants have over 40 years of combined experience, providing full VAT and tax services to ensure your business complies in accordance with HMRC Guidelines. A&C are experienced with the new Making Tax Digital scheme. We have already helped many clients old and new get their accounts set up and ready for the switch. Our dedicated Making Tax Digital experts ensure this is done without affecting your business in any way and a smooth transition is key to the successful implementation.

          A&C Chartered Accountants are at the forefront of the best cloud accounting software to ensure the most efficient technology fits perfectly for your business. Through extensive research and training our team use Xero and Sage Business Cloud to help submit your tax returns online. Your dedicated business account manager will provide free cloud accounting training and offer unlimited support whenever you need it.

          For more information please do hesitate to contact us on 0161 962 1855. Alternatively, you can email us using the form below and one of our dedicated accountants will contact you back as soon as possible.

          Need more information?

          We love nothing more than learning about new start-ups and helping you get off on the right foot! We offer a wide range of services which are unique to businesses who are just getting going! As start-up accountants we have a wealth of experience in all sectors between our team. From restaurants, fashion brands, fitness centres and many creatives start their business correctly and ensure they are staying tax compliant. The team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

          Our fantastic team at A&C Chartered Accountants are here to help.

          Contact us below

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            business spreadsheets explaining VAT
            By Katie Making Tax Digital • Startups • Tax Advice 0 Comments

            The UK VAT rate explained

            Firstly, what is VAT?

            VAT, or Value Added Tax, is levied on the sale of goods and services in the UK. It is a type of ‘consumption tax’ because it is charged on items that people buy. It is also known as an ‘indirect tax’ because it is collected by businesses on behalf of the Government. However, it is important to remember that it is not charged on products of services. Duty-free goods are exempt, and this explains why it can be known as destination-based tax, meaning the tax rate is normally based on the location of the consumer and the sales price. In the UK, the tax plays a huge role in generating the third largest revenue for the government behind Income Tax and National Insurance.

            Does your business need to register for VAT?

            Business owners need to be fully aware of the value-added tax (VAT) and all other things related to it no matter what. The value-added registration threshold in the UK starts from £85,000. Therefore, when your turnover is more than this amount you need to make sure you are VAT registered. You can also register your business on a voluntary basis. It is important to remember as a business owner, that this figure is more than likely to change every so often. Businesses need to consider the great benefits that come with registering even if your VAT return is way below the threshold.

            Responsibilities for VAT-registered businesses

            • You must charge VAT on your goods or services.
            • Likewise you may reclaim any VAT they’ve paid on business-related goods or services.
            • You must report to HM Revenue and Customs (HMRC) the amount you have charged and paid.

            It is important to note that if you have charged more than you have paid; you must pay the difference to HMRC. Alternatively, if you have paid more than you have charged, you are eligible to reclaim the difference back from HMRC.

            The UK VAT rates for 2019  

            • The Standard Rate is 20% and it applies to most goods and services that are taxable in the UK
            • The Reduced  Rate is 5% and this applies to some goods and services such as children’s car seats and home energy.
            • The Zero Rate currently stands at 0%. Zero-rated goods and services include children’s clothes and most food items. Despite their being no charges on zero  rates, the sale of goods and services under this category should always be recorded by businesses.

            Deadlines for VAT 

            It is vital that you do not miss the deadline. Your accountant will ensure this does not happen. For submission, the deadline is due on the first calendar month including the seven days duration following your VAT end period. Every business is different, and your period end can be monthly, quarterly, twice a year or annually.

            Making Tax Digital for VAT 

            From April 2019, all VAT-registered businesses with a taxable turnover above the threshold (£85,000) are now required to keep digital VAT business records. Every business with a turnover exceeding the current threshold will have to now ensure that their records are kept digitally. Businesses with a taxable turnover below the threshold are welcome to sign up on a voluntary basis for MTD.

            Our team at A&C have helped many existing and new clients prepare for MTD. Ann, our dedicated client manager uses the latest Making Tax Digital compatible software to ensure you are effectively prepared for MTD.

            A&C Chartered Accountants in Manchester and London offer a wide range of services that relate to all aspects of VAT. A&C can provide in-house VAT training, alongside tax compliance visit support. The team provide a vast array of innovate solutions to give clients the peace of mind they need.

             

             

            By AC Accounts Insights • Making Tax Digital 0 Comments

            Making tax digital for VAT guidance Issued

            Making tax digital for VAT guidance Issued

             

             

            HMRC have now issued their detailed guidance on the digital record keeping and return requirements for Making Tax Digital (MTD) for VAT.

            VAT Notice 700/22 clarifies that spreadsheets may still be used to keep business records provided that there is bridging software that links to the Government gateway.

            There will however be a one year “grace” period during the first year of MTD when businesses will not be required to have digital links between software programs, referred to in the VAT Notice as a “soft landing”.

            The VAT notice includes a number of helpful examples illustrating different accounting systems and the digital links required to comply with MTD for VAT.

            The VAT notice is essential reading for all VAT registered businesses.

             

            WHEN DOES MTD FOR VAT START?

            The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return.

            For example, where a business submits quarterly returns covering the periods to 28 February, 31 May, 31 August and 30 November, the business will need to comply with Making Tax Digital rules for the VAT quarter starting 1 June 2019 and ending on 31 August.

             

            “SOFT LANDING” FOR MTD FOR VAT FOR THE FIRST YEAR

            For the first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020) businesses will not be required to have digital links between software programs. The one exception to this is where data is transferred, following preparation of the information required for the VAT Return, to another product (for example, a bridging product) that is Application Programme Interface (API) – enabled solely for the purpose of submitting the 9 Box VAT Return data to HMRC. The transfer of data to this product must be digital.

            For the first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020), where a digital link has not been established between software programs, HMRC will accept the use of cut and paste as being a digital link for these VAT periods.

            However, for VAT periods starting on or after 1 April 2020, there must be a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software.

             

            USE OF SPREADSHEETS IN PREPARING VAT RETURNS

            Example 3 in the VAT Notice describes a business that uses a spreadsheet and bridging software from April 2019, which allows the information to be transferred to HMRC via an API.  It uses a spreadsheet to record all sales, purchases, and expenses in a digital format. The VAT Return is then prepared within the spreadsheet, using formulae already written into the spreadsheet.

            The VAT Return information is then sent via a mandatory digital link to bridging software, which digitally submits the information directly to HMRC.  Example 6 shows how a spreadsheet would be acceptable in order to consolidate VAT information prior to submit a Group VAT return.

            If you haven’t already done so, please contact us to help you get ready for this significant change in VAT accounting and reporting.

             

            By AC Accounts Insights • Making Tax Digital 0 Comments

            Making tax digital delayed further apart from vat reporting

             

            HMRC have confirmed that no further MTD for business changes will be brought in before 2020 at the earliest.

            The Treasury set out its revised priorities for current digital transformation projects, to make room for the additional demands on its resources of work to upgrade customs systems in preparation for Brexit.

            The HMRC statement notes that the convergence of business taxes from the current range of IT systems onto a single system will now happen at a slower pace. This will slow the creation of the single account for all business customers.

            For individuals, the introduction of further digital services will be delayed, with progress on simple assessments and real time tax code changes put on hold for the time being.

            Note that the introduction of VAT reporting under MTD is still scheduled to commence in April 2019 for those VAT registered businesses with turnover over the £85,000 VAT registration threshold.