Businesses and Self-Employed

Many businesses and self-employed workers do not charge Value Added Tax (VAT) on their services or products because they are earning under the threshold required to register – currently above £85,000 in the UK.  This helps to keep their self-assessment return simpler to complete and excludes them from filing quarterly VAT returns.

HMRC brought in a new system called Making Tax Digital (MTD) for VAT which came into effect on 1st April 2019.  It has made all VAT registered businesses earning over the VAT registration threshold to keep digital VAT business records.

Online Digital Format

For those businesses below this threshold, the process is voluntary.

It required online submission of VAT returns and for all records to be tracked using a digital format online.

In practical terms this means that VAT registered businesses have to account for all their income and expenses using compatible software.

Keep on Top of Your Tax Affairs

The government first announced in May 2015 its plans on Making Tax Digital as a key part of to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

It was quickly recognised that businesses would require time to get familiar with the new requirements of MTD and it was agreed that in the first year of operation, HMRC would not issue filing or record keeping penalties where businesses were doing their best to comply with MTD.

However, sanctions will remain possible in cases of deliberate non-compliance, and in order to safeguard VAT revenue.

VAT Online

Businesses would not be forced to go digital for their VAT returns if they are unable to adapt to the new service due to age, disability, location or religion.  There would be provision for them to apply for an exemption.   Neither would anyone who is already classed as exempt from be required to file their VAT online.

Businesses that are registered for VAT but are below the VAT threshold would also not be required to use the MTD service, but they could choose the option to do so.

Micro Business

For micro business owners who are non-VAT registered, there is no obligation to use MTD software YET.

However, MTD is still coming and will become compulsory in the near future.

Currently the date proposed is 1st April 2020 after which time all self-employed workers will be required to keep digital records and use software that in compatible.

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Disclaimer: If you are in any doubt about what you can and cannot claim for, it is important that you contact an accountant or relevant tax specialist who can give you bespoke advice directly relevant to your circumstances.
None of the information given here is tax advice.