Lentells are able to work with you ensuring you are fully prepared for the introduction of Making Tax Digital (MTD). As QuickBooks Platinum ProAdvisors we can recommend the best package for your business and provide on-going support and training. 

Contact us to find out more about how we can support you and your business, contact our Cloud Accounting Specialists here.

Making Tax Digital

In July 2017,  the Government announced that all VAT-registered businesses and organisations with a taxable turnover over the VAT threshold would have to keep digital records from April 2019. Since then MTD has been extended to all VAT-registered businesses and will be extended further for Income Tax for Self Assessment (MTD for ITSA) 

MTD is part of HMRC's goal to transform the UK tax regime into the most digitally advanced one in the world, helping make the system easier to understand and for less tax revenue to be lost through filing mistakes. 

April 2022

From 1 April 2022, all VAT-registered businesses must compile VAT returns and submit them using software that connects to HMRC's systems via a software link.

MTD Penalties

HMRC has announced that penalties will be issued to those not completing VAT returns through MTD from 1 November 2022.

Anyone who files a VAT return through non-electric submission will face penalties of up to £400. 

The ACCA has warned that a points-based penalty scheme has been proposed for MTD for VAT and Self-Assessment Income Tax (MTD for ITSA).

These changes will apply to VAT customers for accounting periods on or after 1 April 2022, and to ITSA customers with a turnover about £10,000 for accounting periods starting on or after April 2024. 

The penalty system will work as follows:

• a default will be recorded for any mistakes or late MTD filing
• taxpayers will enter a surcharge period for 12 months if they make another error or fail to submit a return - a percentage of the money owed will be charged as a fine 
• each new fault will accrue further points
• points will be translated into a percentage charge, between 2% and 15%

MTD for VAT exemptions 

Businesses that are already exempt from filing their VAT returns online continue to be exempt and do not need to reapply. 

Otherwise, businesses can apply for exemption if:

• it is not "reasonably practicable" for you to use digital tools because of age, disability, remoteness of location or any other reason
• you or your business are subject to an insolvency
• your business is run entirely by practicing members of a religious society or order whose beliefs are incompatible with using electronic communications or record
• Applicants for exemptions need to fully explain the reasons why they believe they meet one of the exemption criteria before HMRC decides if the claim has been successful.

Future of MTD

MTD for VAT is the start of HMRC's digitalisation process, with MTD for income tax up next in April 2024. 

MTD for ITSA had originally been due for April 2023, but the Government delayed it by a year to give businesses more time to recover from the worst of the Covid-19 pandemic. 

A pilot scheme is currently underway for businesses that want to get started with MTD for income tax rules right away. 

MTD for corporation tax, the final part of the digitalisation process, is due to begin no earlier than April 2026. 

For more information regarding Making Tax Digital, please contact our Cloud Accounting Specialists.