Solicitor firms only need to supply a report to SRA, where an accountant has qualified it. For example, if client money is at risk. Qualified accountants’ reports were submitted via email to the SRA in the form of a completed AR1 and any appendices. However, the SRA has recently changed their system for filing qualified reports, which should now be submitted through a mySRA account.
Contact us: info@xaviersaccountants.co.uk
Making Tax Digital
MTD for VAT extended to all VAT-registered businesses from April 2022, with income tax quarterly reporting applying from April 2023. Corporation tax will be consulted on later this year.
MTD for VAT
Since April 2019, the vast majority of VAT-registered businesses with taxable turnover above the VAT threshold of £85,000, have been mandated to keep digital VAT records and to submit their VAT returns using MTD compatible software.
From April 2022, compulsory MTD for VAT will be extended to all VAT-registered businesses.
The government's view is that digital records are more accurate and avoidable mistakes cost the Exchequer around £8.5bn a year. HMRC considers that the amount of tax lost to these avoidable errors is reduced, but not necessarily eliminated, via:
· the improved accuracy provided by digital records,
· the help built into many software products, and
· the fact that information is sent directly to HMRC from the digital records avoiding transposition errors.
What MTD for VAT means
From April 2022, all VAT-registered businesses will be mandated to keep VAT records in digital form. Businesses may use dedicated record-keeping software, a combination of software packages or spreadsheets. If spreadsheets are used, the software must be capable of taking the relevant information from the spreadsheet electronically and sending it direct to HMRC without further manual adjustment. Many businesses rely on bridging products to fulfil this function.
The deadlines for sending VAT returns and making payments have not changed.
The information submitted to HMRC is the same as on the nine boxes of the current VAT return, (although as the UK leaves the EU, these boxes may change). Details of individual transactions are not submitted to HMRC.
MTD for income tax
MTD for income tax will apply from April 2023 for unincorporated businesses and landlords with total gross income above £10,000. Businesses and landlords who join MTD for income tax will need to submit a quarterly summary of their business income and expenses to HMRC using MTD-compatible software.
The government observes that this information would have been very useful during the development of support packages for business during the recent COVID-19 crisis, when HMRC found that the most recent taxpayer income data held for the overall population of self-employed taxpayers was from 2018/19 tax returns.
The existing small pilot of MTD for income tax will be extended to allow more taxpayers to test and familiarise themselves with the system in good time before mandation.
The intention is that having made quarterly submissions of income and expenses, taxpayers will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they will be able to add any non-business information and finalise their tax affairs using MTD-compatible software. This includes information about employment income, bank and building society interest, dividends, pension contributions, student loan repayments etc, and the goal is for this to replace the need for a self assessment tax return.
Software developers will need to build this additional functionality into their products as MTD for income tax continues to develop.
More frequent reporting may also lead to more frequent payment of tax in due course, but that is not the intention at this stage.
More information on who is eligible and how to join the MTD for income tax pilot is available on gov.uk HMRC will widen eligibility over time and the pilot will support most sole traders and landlords by April 2021. [Roadmap announced for Making Tax Digital ICAEW]
The Solicitors Regulation Authority (SRA) has agreed to extend by a year the use of the Solicitors Indemnity Fund (SIF) to provide post six-year run-off cover for claims against firms which have closed without a successor practice.
