The soft ending period for making tax digital was due to be 31st March 2020. Which was brought in to end the reign of HMRC not coming down too harshly on non-compliance. However, since that time we have seen Coronavirus cause significant disruption to businesses in every single industry. It’s for this reason we have seen an extension to the introduction of making tax digital. The landing period is now extended to the 1st of April and will end from VAT periods that start after this date.
This extension on making tax digital was introduced to give businesses more time to get their digital and record-keeping systems in order as it would have been unfair to have expected them to have got it done in the midst of a global pandemic that had affected their day-to-day business on a significant scale. And so as we approach this new landing period we are going to quickly go back over what making tax digital is all about.
Making tax digital was introduced by HMRC back on the 1st April 2019 to apply to most UK VAT registered businesses. With around 3% of businesses whose organisation/structure was more complex joining from later in that year on the 1st October 2019. It was brought in not only so HMRC can enforce against non-compliance in a much more effective way but also overhaul the UK Tax system into becoming one of the most digitally advanced in the world.
One key aspect to introducing and implementing making tax digital is digital record keeping. This means that your business should be keeping and store information such as your business’s name, VAT number, address etc. all digitally. It’s usually easy to keep these either in a spreadsheet or a digital bookkeeping system so that they can be linked to your VAT return.
Speaking of the VAT return, when the time comes for your VAT return, information from your digital VAT records must be transferred from your digital database to your VAT return without the need to copy and paste. If you don’t yet have a process in place for this linking it’s recommended that use the grace period given as part of this extension to making tax digital to establish the process for this linking.
It is important for businesses to understand that the soft landing period does not allow them to submit old-style VAT returns if they fall into making tax digital for VAT mandate. They must use Making Tax Digital software to send their VAT return to HMRC. During the soft landing period only, where a digital link has not been established between software programs, HMRC will accept the use of ‘cut and paste’ or ‘copy and paste’ as being a digital link.
Here at D&K Accounting, we are on hand to help your business understand making tax digital and to help you make the jump to complying with all of the new regulations. As well as helping you digitise and streamline all of your business processes to make all of your record and bookkeeping not only digital but more efficient at the same time.