Posted: Tue 21st Jul 2020
Measures requiring businesses to submit VAT returns via digital means will be extended to all companies from April 2022.
Under current rules, most VAT-registered taxpayers with a turnover above the VAT threshold of £85,000 have needed to keep their VAT records digitally and update HMRC through secure software since Apri 2019. Over 1.4m taxpayers have used the system to submit more than 6m returns.
The requirement is part of the government's Making Tax Digital (MTD) strategy which aims to see the end of the tax return and transform the tax system.
Ministers today set out the next steps for the programme. From April 2022, MTD will be extended to all VAT registered businesses with turnover below the VAT threshold, and from April 2023, it will apply to unincorporated taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually.
The government will also consult in the autumn on extending MTD to corporation tax paid by incorporated businesses.
HM Revenue & Customs will expand its pilot service from April 2021 to allow businesses and landlords to test the service before the requirement to join. The government estiminates that adopting MTD will cost businesses an average £175 with an additional annual cost of around £20.
Financial secretary to the Treasury, Jesse Norman, said: "We are setting out our next steps on Making Tax Digital today, as we bring the UK's tax system into the 21st century.
"Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis."
A written ministerial statement making the announcements says "the government remains committed to extending Making Tax Digital to other taxes".
The government also claims MTD reduces tax return mistakes which cost the exchequer £8.5bn in 2018-19.