The UK tax system is due an overhaul to streamline and digitalise the administration processes.

The transition has already begun: since April 2019 businesses with annual turnover of over £85,000 must submit VAT returns using MTD-compatible software and keep VAT records in a digital format. From April 2022 these MTD requirements will be extended to all VAT-registered businesses.

From April 2023 landlords, sole traders and partnerships will also have to keep tax records digitally and submit quarterly reports of income and expenses using MTD-compatible software.

This may sound daunting but spreadsheets do qualify as digital records. The key is to link your spreadsheet to software that can submit the quarterly returns directly to HMRC’s computer. There are cheap and easy software solutions available but in some cases conversion from paper ledger books and handwritten invoices will take a while. There will be very few exceptions from the requirement to digitalise business records. Micro businesses with less than £10,000 of income will be exempt, as will those for whom disability makes using a computer very difficult. All other businesses and landlords will have to comply.

We have just under three years to prepare so let us work together to prepare for MTD.
 

Last updated: April 29th 2021.