It’s now 2020, and after the introduction of Making Tax Digital last year, your business has probably had time to relax and adjust to the changes that MTD has brought…
…We’re sorry to break it to you – but there are more changes yet to come.
If your business has a turnover of £85,000, you will be among the 1.2 million UK businesses that have to submit digital returns. Although you are hopefully now familiar with Making Tax Digital regulations, there will be some minor tweaks to the rules in 2020 that you will need to be aware of. These changes come into effect along with the end of the year-long ‘soft landing’ that was put in place.
MTD Changes in April 2020
These changes will apply to businesses who registered for Making Tax Digital in April 2019.
- Businesses will need to digitalise data on supplies that have been made and supplies received – this includes the time of supply, value, VAT rate, stocks and fixed asset transactions
- As small businesses are likely to be the worst affected by this change, they may have to invest in software packages which are compatible with Making Tax Digital
Digital linking between MTD software
- Data transferred between MTD-compatible software can no longer be ‘cut and pasted’ or manually inputted – businesses need to integrate digital links between MTD platforms
- This change is more likely to affect medium to large enterprises who are using multiple accounting systems
- The difficulties these businesses will encounter through using digital linking can be resolved through investing in VAT software that digitally extracts and combines all the data and then files this using the MTD API
Penalties no longer suspended
- Penalties for late filings were suspended during the ‘soft landing’ period, however, when April hits, penalties will come into effect
- These penalties will be based on offences committed in the previous 12 months, which can reach 15% of the VAT due as well as fines of up to 100% of undeclared VAT
MTD Changes in October 2020
These changes will apply to businesses who registered for Making Tax Digital in October 2019.
- If your business had to delay registration until October 2019, the above changes will instead apply to your business from 1 October 2020
Do you need more time to comply?
Businesses who have complex/legacy systems can apply for additional time to comply with the changes taking effect this April.
To apply, you need to make a formal application to HMRC no later than the ‘soft landing’ period end. You will need to explain why your business will not be ready to comply in April. You will also need to submit details on the systems you are using and a timeframe of when you will expect your company to become fully compliant.
How can we help you?
At J&P Accountants we want to make Making Tax Digital manageable for your business. We can:
- Advise you on the MTD process
- Simplify MTD compliance for your business
- Advise on the best types of MTD software
- Submit VAT returns on your behalf