Business owners at risk of penalties in MTD overhaul

Making Tax Digital

More than 2 million business 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.

 

A report by The Accountancy Partnership revealed that 37% of business owners use paper-based systems or a collection of photos to keep track of their finances. One in ten store their essential documents in an old shoebox or drawer.

 

The survey of 1,200 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.

 

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.

 

Millions are at risk of non-compliance if they do not update their bookkeeping and become familiar with the new MTD updates before the reforms come in to action next year.

 

Digital records 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 2022.

 

As well as digital records, 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.

 

It is advised that those who are not using a digital system to start using one now, so that they are confident with any software before it becomes mandatory.

 

For more information, please contact your local Lentells. As QuickBooks Platinum ProAdvisors, we are able to advise on the best software package for your business. 

Chard, 01460 64441, chard@lentells.co.uk

Seaton, 01297 20584, seaton@lentells.co.uk 

Taunton, 01823 286274, taunton@lentells.co.uk 

 

 

Blog post uploaded 10 Aug 2021