The Government issued the VAT Notice 700/22: Making Tax Digital for VAT back in March 2019.
‘Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.
It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application. The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally via our Application Programming Interface (API) platform.’
This all sounds good. The move to online accounting makes a lot of sense from an accuracy and an efficiency perspective. Next year all VAT registered businesses will have to comply with the notice. I’d better get on with it then.
The problem is that I need to use software that can talk to HMRC, as in their words ‘HMRC will not give you an exemption purely on the basis that reasonable effort, time and cost may be involved in making the transition to Making Tax Digital, for example choosing and buying any new hardware or software or learning to use them.’
In a nutshell this means that my business is going to have to pay more money to pay its taxes. In order to comply with a change in legislation, which is going to save HMRC money, my business is facing another unexpected and unmerited cost. I am being taxed to be able to pay tax. This can’t be right.
Making tax digital is making tax taxable.