Cost-saving will be key for many businesses struggling to get back up to speed after the pandemic.

Many small and medium-sized enterprises (SMEs) were hit hard and now face higher inflation, skills shortages and rising wages.

The Bank of England says the inflation figure could even hit four per cent by December. So, cutting costs can help get thousands of UK firms through these challenging times.

There are many options for businesses to cut costs, including:

Review your suppliers

Make sure you are getting the best value for money. Get a minimum of three quotes for your supplies, particularly in areas like communication, where there are often better deals to be had.

You should also give existing suppliers the chance to review their prices.

Your business is important to them, but don’t be afraid to walk away for a better deal.

Innovate

Sometimes you need to spend a little to save a lot. If you are operating on older systems or software, it may make sense to upgrade now so that you are more efficient as a business.

An example of this is digital invoicing and bill payments. These techniques could help to reduce administration costs and postage, while also helping you to avoid piles of paperwork – saving you time and money.

Many of the latest cloud accounting platforms allow you to digitise these processes, while also offering you many other benefits, including the option to go paperless.

Assess your workspaces

The requirements for your business premises may have changed during the last year, especially if many of your staff have moved to hybrid or remote working.

Assess whether your current commercial property still meets your needs or whether there could be cheaper alternatives elsewhere.

If you have moved entirely to remote working, you could do away with business premises altogether.

Go second-hand

Quite often refurbished equipment can perform just as well as new and allow for considerable savings. This does not just apply to office furniture.

Properly refurbished computer equipment can also result in big savings as can equipment like copiers.

Be aware, some capital allowance tax schemes won’t allow claims made on second-hand machinery or equipment.

Use an accountant

It may seem obvious, but using our expertise could help you cut your costs considerably.

We can look through your books and spot cost-saving opportunities that you may have missed and make a detailed analysis of the day-to-day running costs of your business.

We can also help you find reliefs and allowances that help you reduce the costs you already have by offsetting them against tax.

If you are struggling with a cost crisis, act now. Cash flow issues are one of the most common reasons for business failure.

Many small and medium-sized enterprises (SMEs) were hit hardest at the beginning of the pandemic.

They had access to support, like the Bounce Back Loan, which was easier to access and had lower interest rates, but those only helped during the short term.

Now a growing number of SMEs are struggling with debt. The latest Bank of England Credit Conditions Survey shows that the majority of banks (44 per cent) reported an increase in loan defaults by small companies in the third quarter of this year.

This is twice the levels seen during the height of the pandemic.

There are options for businesses that have got into a debt spiral, including:

Deal with priority debts first, including:

• Business rates
• Utility bills
• Mortgage and rent payments
• Outstanding tax payments
• Payments to strategic suppliers
• Bank loans
• Any form of borrowing with a personal guarantee

Consolidate or refinance loans

It may make sense to consolidate several loans into a single payment or refinance an existing loan.

With inflation increasing, businesses should take advantage of the historically low interest rates that currently exist.

You should seek independent advice before doing anything around consolidating or refinancing loans.

Tackle late-paying customers

Late payments are the bane of most small businesses. Despite Government efforts to tackle this issue, it continues to be a problem for many.

Challenging customers about their debts can be difficult. However, businesses should strengthen their credit control processes so they are paid on time.

Focus on cash flow

Cash flow is the lifeblood of your business and there are some simple measures you can put in place to help keep it healthy.

For example:

• Improve your process for chasing up debtors
• Agree on payment terms in advance
• Lease rather than buy equipment or vehicles
• Review and reduce business costs.

Boost your revenue

As well as cutting costs, you can also tackle a cash flow crisis and pay off your debts by improving your turnover.

This can be achieved by:

• Increasing leads to attract more customers
• Raising your prices
• Finding more ways to cross-sell or upsell your services or products
• Engage your staff and seek their input. They may well have ideas that are well worth putting into action.

Managing your income and cash flow can be challenging so seeking professional advice and insights could pay dividends.

Avoid debt in favour of other forms of finance

You could explore the following:

• Liquidating assets – Creditors may gain more than if a business is wound-up.
• Look for new investors – Can you generate income through the sale of shares? Have you considered the tax-efficient Enterprise Investment Scheme?
• Peer-to-peer lending or equity crowdfunding – These alternative forms of finance are great for businesses that can’t obtain traditional finance.
• Invoice financing – If you have a large number of late payments, you could finance the invoices and get paid sooner.
• Borrowing from friends or family – Beware, this can put a strain on relationships.

Make sure you’re getting fair treatment from lenders

You’re entitled to be treated fairly by your bank or building society.

The Lending Standards Board operates as an independent body (albeit one funded by its registered financial firms), with an independent board made up of non-executive directors.

Link: Small business loan defaults rise substantially

If you have to submit a Self-Assessment tax return to HM Revenue & Customs (HMRC), you only have a few weeks left to submit it online.

The clock is ticking on the 31 January 2022 online tax return deadline – miss it, and you could face fines.

The 2020/21 tax return covers earnings and payments during the pandemic, including any taxable grants or payments from COVID-19 support schemes up to 5 April 2021.

To help you get your return in on time, here is some advice:

Don’t leave it until the last minute

You’re more likely to make mistakes or miss out important information if you leave it too late.

Anecdotal evidence also suggests that tax returns submitted just before the deadline are more likely to be subject to HMRC enquiries and investigations.

Save time, be prepared

When the tax year ends on 5 April, you can start getting prepared for submitting your tax return right away. If you collect information throughout the year and stay on top of your bookkeeping, you’ll save valuable time when it comes to filling in your tax return. Plus, if you do need to get in touch with HMRC, you’ll avoid the last-minute rush in January.

Organisation is key

Make sure all of your paperwork and details are prepared ahead of time, including:

• Unique Taxpayer Reference (UTR) number (you need to register for one if you’ve not completed a Self-Assessment tax return before)
• National Insurance number
• Details of all your income; for example, if you also have rental income or have earned bank/building society interest, or have received dividend payments
• Records of relevant business expenses.

File online

If you are still using a paper return now is a great time to switch. Registering to file online makes it easier to upload all the information that HMRC needs from you. You don’t need to do it all in one go – simply save your form and fill it in when you have the time.

Keep track of income and expenses

Keep accurate records of income and what you’ve claimed as business expenses throughout the tax year so that you’re ready to go, including:

• Bank statements
• Chequebooks and paying-in slips
• Credit card statements
• Sales invoices/till rolls
• Job quotes or estimates
• Purchase invoices and expense receipts
• Payroll records
• VAT records.

This information will make completing your return much easier.

Sick of paper records? Have you considered cloud accounting?

Taking your record-keeping online could help to cut back on the paperwork you have to retain and automate many bookkeeping processes.

Budget in advance

Once you’ve submitted your return, you can manage any surprises within your tax bill by budgeting in advance and getting ahead if you need to make any payments on account.

Get help

If you don’t fancy going it alone, why not hand the hard work to us. Every year we produce hundreds of tax returns for clients.

If you need help, don’t delay. Get your Self-Assessment information over to us today.

UK businesses have had plenty to cope with over the last 20 months or so. Hammered by COVID-19, hit by a skills shortage and coping with sometimes patchy supply chains.

So, it’s even more important that they have robust measures in place to tackle fraud.

Fraud is simply the intent or the act of misrepresentation – scammers lying about themselves or their actions and services – to cause a gain or loss.

Due diligence, internet controls and risk management can often be overlooked and seem expensive or hard work.

However, according to the Metropolitan Police, this perception often leaves SMEs particularly vulnerable to fraud. With many owners and managers unaware of the risks their businesses face.

Fraud can come from anywhere, including:

• Staff members
• Customers
• Suppliers
• Third parties, unconnected to the business.

To assist businesses, here are some tips to prevent business fraud:

Be sceptical

If it sounds too good to be true, it probably is. Thoroughly question all deals, opportunities, documents, transactions and information.

Have a thorough understanding of your business, including:

• How it operates
• The staff you employ
• The products and services it provides
• Your target market and your business
• Your legal and regulatory obligations.

Know your customers and suppliers

When you understand who you do business with, you can spot any business requests or transactions that look fraudulent.

Conduct due diligence, such as checking the customer or supplier details you have on file, as well as online searches.

Identify your vulnerabilities

Imagine how a fraudster might target your business and test the systems you already use to reduce risk. Make sure you and your staff know those systems and regularly review them.

Train your team

Fraudsters will try to target your team, often trying to obtain information via email, phone calls or even in person.

You should train them to spot the signs of fraud and teach them to be cautious of unexpected emails or calls, especially those that purport to be from banks or public agencies, such as HMRC.

Develop a strategy and talk about fraud

Create a fraud prevention and detection strategy for your business. It should detail controls and procedures. Talk about fraud with your staff, suppliers and other contacts.

Take extra care against cyber attacks

With increasing threats from cybercrime, protect your business technology against attacks.

Make sure you back up your systems in case they go wrong or are attacked.

Invest in programmes and services that help to deter or prevent fraudsters from committing fraud.

Understand how money leaves your business, including:

• Methods of payment
• Who has the authority to make those payments?
• Who checks payments are legitimate?

Secure and protect your property

This includes laptops, computers, smartphones and intellectual property.

Factor in business insurance to cover these items if they’re compromised or stolen.

Develop an action plan

Consider when you might need professional or legal advice.

While prevention is better than cure, you and your business need to prepare for the worst. Having an action plan in place will help limit your losses to fraud.

Always report fraud and get help

Action Fraud is the UK’s national fraud and cybercrime reporting centre or you can also report fraud to the police.

If you receive suspicious communications from HMRC or other public agencies make sure you report them as well. HMRC has a dedicated fraud service found here.

The Help to Grow campaign was first announced in the Spring Budget earlier this year but received yet another mention in the Autumn Budget as the Government ramps up support for smaller businesses.

It has been designed to help more than 100,000 SMEs access management training and advice on innovations that are focused on boosting productivity.

Within the latest Budget, the Chancellor committed an extra £196 million in 2024/25 for the Help to Grow Schemes.

What is Help to Grow: Management?

This part of the initiative has already been launched in more than 20 business schools across the UK. It is offering thousands of businesses the opportunity to access an industry-led curriculum, one-to-one mentoring, and alumni network backed by Government funding. Its goal is to provide better training to business owners and their management teams.

What is Help to Grow: Digital?

This will provide SMEs with impartial, high-quality advice on how to use productivity-enhancing software that can benefit their business.

From December, SMEs will be able to access support through the online platform and vouchers to help them with the costs of adopting new software, including cloud accounting systems and support.

What other support is being offered alongside these programmes?

The Help to Grow Scheme is part of a larger campaign that included the launch of the British Business Bank (BBB).

The BBB has already had £484 million invested into it by the Government and the Autumn Budget confirmed a further £1.4 billion of investment in future.

The BBB’s primary goal is to help “businesses thrive and address regional finance gaps”, it wants to make sure that small and medium-sized enterprises (SMEs) can access the finance they need to thrive.

Funding initiatives from the BBB include the Start-Up Loans Scheme, the Regional Angels Programme and the expanding Regional Funds.

How can businesses access the support on offer?

If businesses are interested in using either the BBB’s loans or the Help to Grow Schemes, they should speak with their advisers first to make sure that the funding and support meet their goals.

They can also visit the following sites for more information.

• Help to Grow
• British Business Bank

Link: Autumn Budget 2021

For years businesses on the British high street have been calling for reforms to the business rates system.

The Chancellor has finally announced new measures in the Autumn Budget that he claims will reduce the burden of business rates in England by over £7 billion over the next five years.

The reforms are intended to make the business rates system “fairer, more responsive and more supportive of investment.”

Based on the conclusions of the Government’s review of business rates, which was published alongside the Budget, the reforms include six measures that seek to minimise the costs of business rates.

Here are the key points:

Temporary retail, hospitality and leisure discount – A new temporary business rates relief will be made available to eligible retail, hospitality and leisure properties for 2022/23. Eligible properties will receive 50 per cent relief, up to a £110,000 per business cap. Critics have pointed out that the cap may limit the effectiveness of this relief for businesses with multiple sites.

The business rates multiplier – This will remain frozen for a second year, from 1 April 2022 until 31 March 2023. This means that the small business multiplier will be 49.9p (for businesses with a rateable value below £51,000) and the standard multiplier 51.2p (for businesses with a rateable value of £51,000 or more). Multiply your rateable value by your multiplier to show how much you will have to pay in business rates (before any relief is deducted).

Improvement relief – This will offer 12 months of relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The Government has said it will launch a consultation on this relief with it coming into effect in 2023.

Targeted business rate exemptions – Introduced from 1 April 2023 until 31 March 2035, these will support eligible plant and machinery used in onsite renewable energy generation and storage and offer a 100 per cent relief for eligible ‘heat networks’, as part of plans to decarbonise non-domestic buildings.

Revaluations – One of the key criticisms of the business rates system is the infrequency of revaluations. From 2023, the Government will increase the frequency of business rates revaluations so that they take place every three years instead of every five. This should ensure rateable values are more accurate and reflect the market better. The Government will provide additional funding to the Valuation Office Agency to support the delivery of the new revaluation cycle.

Transitional relief for small and medium-sized businesses and small business scheme extension – These schemes will be extended for another year and will restrict bill increases to 15 per cent for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25 per cent for medium properties (up to a rateable value of £100,000), subject to subsidy control limits.

What about the online sales tax (OST)?

Part of the earlier review looked at ways of implementing an OST to make the retail business space more competitive. At the moment the likes of Amazon benefit from selling the same goods as high street retailers but with lower business rates due to where their warehouses are located.

The OST proposals would look to address this imbalance by taxing goods sold online. In its report alongside the Autumn Budget, the Government said it will continue to explore the arguments for and against a UK-wide OST and will publish a consultation shortly.

If such a measure were introduced, the revenue generated from it would be used to reduce business rates for physical retailers in England.

If you are unsure how these reforms will affect your business costs you should speak with your accountant, as it may be possible to plan investments around the reliefs and exemptions that are introduced.

Link: Autumn Budget 2021

With the Speaker of the House of Commons by tradition not presiding over the Budget, the Chancellor might have hoped he would escape a rebuke over the number of important announcements disclosed to the media in advance.

That was not to be, with the Chancellor instead receiving a ticking-off from Dame Eleanor Laing, the Chairman of Ways and Means, who takes charge on Budget day.

Before Rishi Sunak rose to the despatch box, we already knew the public sector pay freeze would end. The Treasury had also confirmed there would be £5.7 billion for public transport in city regions, £5.9 billion to tackle waiting lists in the NHS, an increase in the National Living Wage to £9.50 an hour, £1.8 billion for housing on brownfield sites, as well as further cash for education.

The question, then, was what the Chancellor was saving for the Budget and whether this would include any significant tax changes.

The 2021 Spring Budget marked a post-pandemic turning point in the Government’s approach to tax and spending. Already this year, the Government has announced several significant tax rises. Corporation Tax is rising in 2023 and next year will see Dividend Tax and National Insurance Contributions rise by 1.25 percentage points.

Any taboo around tax rises had been blown apart. But, at the same time, the cost of living has risen rapidly, putting pressure on households and businesses.

The question, then, was how the Chancellor would balance the cost of the spending plans already set out and the need to recognise the pressure on households and businesses against his desire to repair the public finances following the pandemic.

Would taxes rise and, if so, who would be the winners and losers?

• The economy and public finances
• Spending review
• Science and technology
• Hospitality, arts and culture
• Business and personal taxes
• Scottish Spending Boost
• Conclusion

The economy and public finances

In contrast to his two previous Budgets in Spring 2020 and Spring 2021, the Chancellor struck a strikingly optimistic tone about the country’s economic prospects.

He said that forecasts from the independent Office for Budget Responsibility (OBR) predict economic growth of 6.5 per cent this year, with the economy returning to its pre-pandemic size at the beginning of 2022.

Next year, the OBR expects GDP to rise by six per cent, followed by increases of 2.1 per cent in 2023, 1.3 per cent in 2024 and 1.6 per cent in 2025.

The forecast is significantly better than that presented at the Spring Budget when the OBR predicted economic growth of four per cent this year.

Meanwhile, the OBR’s forecasts for long-term economic scarring as a result of the pandemic and for unemployment have been cut from three per cent to two per cent and 12 per cent to 5.2 per cent respectively.

Acknowledging the increasing pressure on households and businesses, the Chancellor said that inflation is predicted to average four per cent next year.

Turning to borrowing, the Chancellor announced a revised Charter for Budget Responsibility, which will require that:

• Debt falls as a percentage of GDP in normal circumstances
• Borrowing is restricted to investment in future growth and not used for day-to-day spending
• Public net investment does not exceed 3.5 per cent of GDP on average

He said these rules have been met.

Spending review

Moving to the spending review, the Chancellor said there would be real terms increases in spending for every Government department, with overall spending over the parliament rising by £150 billion, averaging 3.8 per cent a year.

He said local authorities will receive grant funding of £4.8 billion, while overseas aid will once again reach 0.7 per cent of GDP by the end of the Parliament.

The Chancellor went on to say that schools funding for each pupil will return to 2010 levels and a tripling of investment would create 30,000 new special school places.

He then set out 1.7 billion of Levelling Up funding for places include Stoke, Leeds, Doncaster and Leicester.

Next, he said there would be £21 billion for roads and £46 billion for railways as well as funding to bring public transport in regional cities in line with that available in London.

Finally, he outlined a £3.8 billion investment in skills and training.

Science and technology

Moving to his plans for science and technology, the Chancellor said that Government research and development (R&D) spending would reach £20 billion by 2024-25 and £22 billion by 2026-27.

However, he said there were problems with the way R&D tax reliefs have been working, announcing plans to expand them to cover investment in cloud technology and data, but also to restrict their use to domestic activities. He did not set out what would constitute domestic activities.

Elsewhere for science and technology, he announced the launch of visa programmes for highly skilled individuals.

He also confirmed a new UK Shared Prosperity Fund worth £2.6 billion to boost skills.

Hospitality, arts and culture

Hospitality was a significant theme in the Budget, with the Chancellor making several announcements targeted at the sector.

400,000 properties used by retail, hospitality and leisure businesses will be able to benefit from a 50 per cent business rates discount.

Meanwhile, the Chancellor announced extensive changes to alcohol duties, which included simplifying the banding to ensure the drinks with the highest alcohol content had higher duties and those with the least alcohol, the lowest duties.

He said this would mean high percentage drinks would attract more duty and the lowest percentage drinks would attract less than they have done until now.

Meanwhile, Small Brewers will be expanded to other small alcohol producers, while there will also be reliefs for draught beers and sparkling wines.

Turning to the arts and culture, he said tax reliefs for the sector would be doubled and extended until March 2024.

Business and personal taxes

Before the Budget, there was some suspicion that business and personal taxes might be at the forefront of the Chancellor’s announcements. However, that turned out not to be the case with them receiving relatively little attention in the speech itself.

The Chancellor made no mention of the Capital Gains Tax (CGT) and Inheritance Tax (IHT) reforms that had been predicted in some quarters.

Instead, he turned his attention to business rates, saying he would not heed calls to scrap them, instead opting for more frequent revaluations every three years, starting in 2023; introducing an investment relief for green technologies and an improvements relief that would delay increases in rates, in the following 12 months; as well as cancelling the planned increase in the multiplier.

Away from business rates, the Chancellor confirmed a further extension to the £1 million Annual Investment Allowance until March 2023.

He said that, as expected, the planned increase in fuel duty would be cancelled. Also expected, was confirmation that the National Living Wage will rise to £9.50 in April 2022.

The Chancellor announced details of the Residential Property Developer Tax, announced in February 2021, confirming a four per cent levy on companies and corporate groups’ profits from UK residential property, where they exceed £25 million a year.

While not announced in the Budget, the documents published after the Chancellor sat down confirmed that the deadline for paying Capital Gains Tax (CGT) on property would be extended from 30 to 60 days.

Scottish Spending Boost

Through the Barnett formula, which allocates the proportion of spending in the devolved nations, Scottish Government funding will increase by £4.6 billion.

The British Business Bank’s Regional Funds will also be extended in Scotland providing additional funding of up to £150 million to SMEs.

Conclusion

The Chancellor struck a markedly different tone from his Spring Budget, with optimism that could have been mistaken for the Prime Minister.

There were no new major tax rises and good news for the beleaguered hospitality sector.

Strikingly, the Chancellor felt sufficiently optimistic to say he planned to see taxes going down by the end of Parliament.

Whether that ambition will come to pass will depend on whether the economy meets the new, more upbeat expectations set out by the OBR.

Official documents link

Thousands of taxpayers across the UK have received ‘nudge letters’ from HM Revenue & Customs (HMRC) encouraging them to declare unpaid tax.

The reasons for being targeted vary but the impact of being contacted by HMRC can cause a lot of stress, leaving many taxpayers unsure about what they should do.

Who is HMRC targeting with nudge letters?

HMRC has said there are a number of reasons why they may issue a nudge letter to a taxpayer, but a large number of these communications seem to come from HMRC obtaining information that suggests a taxpayer has overseas income or gains.

They are also concerned that some taxpayers may not have paid the remittance basis charge – a flat rate tax charge on overseas income and gains for particular qualifying individuals living but not domiciled in the UK.

HMRC has said that its letters may not indicate what year income or gains were realised, which means their enquiries could relate to multiple tax years and more than one asset.

This lack of transparency has left many nudge letter recipients bemused.

What should you do if you receive a nudge letter?

The first thing is not to panic. HMRC has said taxpayers may be contacted because of:

• Discrepancies in the data received from overseas tax authorities;
• Changes to an individual’s personal circumstances or tax laws; or
• New information supplied to them that requires clarification.

HMRC typically gives taxpayers 30 days to respond to a letter before it begins to take any action, although in some cases it may ask you to respond sooner.

While it is important to respond quickly, if you cannot provide a suitable answer within this timescale, HMRC may offer an extension if one is requested.

Who can help with HMRC nudge letters?

If you receive a nudge letter from HMRC you should seek help from a tax adviser at the earliest opportunity. They can communicate with HMRC about its requirements, assess the reason for the letter and calculate what tax may be due.

In some cases, taxpayers that have undeclared overseas income and gains may be able to use the Worldwide Disclosure Facility, which could help to reduce penalties and the tax bill.

Link: HMRC sends ‘nudge’ letters to non-doms over unpaid tax

The Coronavirus Job Retention Scheme (CJRS) ended in September but many firms could still be subject to a CJRS compliance check in the weeks and months ahead.

HM Revenue & Customs (HMRC) has been sending out letters to employers throughout the year telling them they need to pay back CJRS payments because they claimed too much or are suspected of furlough fraud.

What is a compliance check?

In addition to checking CJRS payments, HMRC could write or phone to say they want to check:

• Any taxes you pay
• Accounts and tax calculations you have submitted
• Your Self-Assessment tax return
• Your company tax and VAT returns
• PAYE records and returns, if you employ people.

These compliance checks can even be sent at random where there is no suspicion of illegal or inappropriate activity.

How does HMRC determine CJRS fraud?

HMRC classes furlough fraud as:

• Not paying employees the full amount they are entitled to
• Employers claiming furlough payments for workers who are still working for them
• Claiming payments for non-existent employees
• Not telling staff they are furloughed, who only find out when they receive their wages
• Backdated claims that include periods in which the employee was working.

What if my business was not entitled to payments?

HMRC can claw back any money paid out which the employer was not entitled to via a 100 per cent income tax charge whether the claim was made innocently or deliberately. This includes overpayments of a CJRS grant due to errors.

The compliance check will request details of staff members and how much money they received while furloughed. HMRC will typically give a short timescale to provide this information – usually around 30 days.

HMRC will write to tell you the results of the check. You will then be:

• Told no additional tax is due;
• Repaid if you’ve paid too much tax – you may also get interest on the amount you’re owed; or
• Asked to pay additional tax within 30 days if you owe more ­– you’ll normally have to pay interest from the date the tax was due.

You may also have to pay a penalty. When issuing fines HMRC will look at:

• The reasons why you underpaid or overclaimed the tax
• Whether you told HMRC as soon as you could
• How helpful you’ve been during the check.

If you have problems paying, you should tell HMRC immediately, as it may be possible to arrange a time to pay arrangement.

If I am penalised, how much will I pay?

The penalty percentage will fall within a range and depends on the type of behaviour and whether the disclosure was unprompted or prompted. They fall broadly into three categories:

• Deliberate
• Non-deliberate
• Deliberate and concealed or treated as deliberate and concealed

Each carries a different penalty, which can be seen here.

If you do get a letter or phone call about a CJRS compliance check then you should seek immediate assistance from an accountant.

Link: Flood of HMRC fraud enquiries expected as furlough finishes

Unincorporated businesses have heaved a sigh of relief after the Government delayed the date for the implementation of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) by one year to 2024.

Hit hard by the pandemic, it will give these businesses, including the self-employed and landlords, an extra 12 months breathing space to prepare for the changes.

What are the changes?

The self-employed and landlords with a gross income from their business or property of more than £10,000 per annum will need to follow the MTD for ITSA rules from 6 April 2024.

It will not be necessary for general partnerships to join MTD for ITSA until the tax year beginning 6 April 2025, while the date other types of partnerships will be required to join is yet to be confirmed.

The Government introduced a more favourable system of penalties for the late filing and late payment of tax for ITSA in March 2021.

This penalty scheme is for those who are required to comply with MTD for ITSA and will now also come into force in the tax year beginning April 2024 for the self-employed and landlords, and April 2025 for all other ITSA taxpayers.

There will be the chance to explore the benefits and challenges of MTD early if you are an eligible business or landlord, via the Government’s pilot scheme.

This is already underway and will be increasingly expanded during the 2022/23 tax year, preparing for a greater scale of testing in the 2023/24 tax year.

How can you prepare for these changes?

It’s vital that businesses use the correct software to meet the new requirements, such as HMRC approved cloud accounting software or a set of compatible software programs that can connect to HMRC systems via its Application Programming Interface (API).

The software must be able to:

• Keep records in a digital form
• Preserve digital records in a digital form
• Create a VAT or tax return from the digital records held in functional compatible software and provide HMRC with this information digitally
• Provide HMRC with VAT and tax data on a voluntary basis
• Receive information from HMRC via the API platform that the business has complied.

Will you be ready?

MTD is the first step in HMRC’s shift towards an innovative, digital tax service, supporting businesses through their journey in the ever-evolving modern world.

Although the initiative has been postponed by a year, taxpayers must be fully prepared, as they could face fines or penalties if they do not abide by these changes.

It is important that they implement suitable software, such as an HMRC-approved cloud accounting solution, and migrate their information across to the new systems in advance of the new deadline.

This may require additional training and changes to existing accounting processes and procedures.

Link: Businesses get more time to prepare for digital tax changes