As businesses are navigating through the uncertain times due to the COVID-19 pandemic, HMRC have...
In these unprecedented, challenging and uncertain times, tax is a constant, however the HMRC are not immune to the impact currently being experienced. Last Month was supposed to see the end of the ‘soft landing’ period for Making Tax Digital (MTD) but, to further ease pressure on businesses, HMRC have announced a further extension until 2021.
The extension was announced via an email to stakeholders:
‘We understand that the impact of COVID-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges.
‘Therefore, we are providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place.’
From inception, HMRC recognised that not all businesses would have these digital links in time and allowed a period of grace, the ‘soft landing’ period. For now, it looks like this will continue and they will now not enforce measures on businesses failing to meet the statutory digital, end to end journey – at least for now.
This comes off the back of a previous announcement which stated that businesses could defer VAT payments between March and June 2020 to be deferred. As many of our customers are asking, it is important to note that businesses must still comply by submitting their VAT return on time.
Overall however, the government considers MTD a success with more than 1.4 million businesses (84%) signed up and over £41 billion of payments put through the new system. This is forecast to reduce the tax gap (amount lost to the treasury through errors) by £300 million a year but given the latest estimate of the overall tax gap in 2017/18 was £9.9 billion, we are unlikely to have seen the end of making tax digital.
With well over 250 VAT returns submitted through Cooper Software’s MTD solution we are proud to have played a part in the success of MTD for IFS customers but we know there is still lots to come and our solution will always be ahead of the curve. MTD for VAT was only the first step in an ambitious roadmap for the UK tax system, the next area the HMRC will be focussing on is Income Tax for the self-employed and landlords but given the current challenges it would be unsurprising if this remained in the pilot phase for now.
Whatever the future holds, you can have confidence that our solution not only meets the requirements of the present but has been designed with the future in mind.