Are you ready for the shift to digital?
By April 2022, all VAT registered entities will be required to follow the Making Tax Digital (MTD) rule by using software to submit their VAT return. Tax legislation requires that the software must have a live digital link to submit the return to HMRC.
Self-employed individuals and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for income tax from their next accounting period starting after the 2023 tax year.
The Government is looking into applying the Making Tax Digital rules to corporation tax. However, this will not become compulsory until 2026. The taxpayer will be required to keep electronic records. But what rights do HMRC hold over accessing the accountancy software? HMRC has the right to access any statutory records which cover any record used to make a complete and accurate tax return. This is not only limited to bank statements sales and purchase invoices etc.
HMRC may make a request for personal bank statements if the process has been carried out as a business transaction, as this would make it part of the business records. If there are no business transactions carried out in your personal bank statements, HMRC would have to provide a robust reason for requesting personal bank statements when it is not connected to the business.
Each request from HMRC should be considered on the ground of whether it is reasonably required to check the accuracy of the tax return that HMRC are checking and should not be automatically provided to HMRC.
A formal HMRC request for information and document is legally enforceable if HMRC issues a formal notice under schedule 36 Finance Act 2008. This can lead to penalties for noncompliance.
Many individuals are under the impression that HMRC would only request information when they can legally enforce this. However, HMRC may make informal requests that are not supported by tax legislation and therefore cannot be followed up by HMRC with a legal information notice. So, it is vital to know to know whether the requested information is reasonable. It is also important to know the level of information to be supplied to HMRC.
As a company we have worked with various software and helped many clients to successfully implement MTD and integrate their process. We also provide a business consultation service to improve the efficiency and control of the business. MTD software and all the other tools are already included in our package. We are equipped with latest technologies which we can give you, as our client, access to for free.
Please contact us if you need to adapt with MTD and automate your business affairs on 0208 249 600 or email us at firstname.lastname@example.org.
Written by Kazi Ashraf.