Small firms to digitise tax returns from 2022
The changes will now impact smaller firms
Britain’s smallest companies will fall within the UK government’s tax digitisation programme from 2022.
VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
Businesses below the VAT threshold can voluntarily join the Making Tax Digital service now.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022, and to the self-employed and unincorporated landlords for income tax purposes from April 2023.
Brian Palmer, former president at the Association of Accounting Technicians and a member of AAT’s tax panel, said: “This clear and unequivocal statement of its commitment to the digitisation of the UK tax regime is a confident move by the government that will see the delivery of HMRC’s ambition to being one of the most digitally advanced administrations in the world.
Ed Molyneux: firms must understand the benefits
“Although, of even greater importance, is that the drive to digital will see many of the smallest businesses benefit from increased productivity as they start to exploit the enhanced functionality available to them from apps and cloud-based accounting products.”
Ed Molyneux, CEO and co-founder of accounting software firm FreeAgent, said: “This update will mainly affect small and micro-businesses, who are already feeling the strain of business impacts from Covid.
“To implement the changes smoothly, it will be important for the government to remember that micro-businesses require more information about what tax digitisation actually is, how it will impact them and what the benefits are.”
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