Jesminara Rahman explains how tax going digital will have an impact on the records that HMRC can request.
By April 2022, all VAT registered entities will be required to follow the Making Tax Digital (MTD) rules by keeping digital records and using software to submit their VAT returns. Tax legislation requires that the software must have a live digital link to submit the returns to HMRC.
Self-employed businesses 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 on or after 6 April 2023.
The government is looking to Making Tax Digital for Corporation Tax, but this will not become compulsory before 2026.
Taxpayers will be required to keep electronic records, but if all electronic records are kept on the software does this mean HMRC has the right to access the accountancy software? In order to understand the impact of electronic records, we need to understand what records are HMRC entitled to request in the first place.
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