Businesses are reminded to take steps to prepare for Making Tax Digital for Value Added Tax (VAT) before it becomes mandatory for all VAT-registered businesses from 1 April this year.

Making Tax Digital is designed to help businesses eliminate common errors and save time managing their tax affairs.

Making Tax Digital for VAT is part of the overall digitalisation of UK Tax. In a recent independent study of over 2,000 businesses, 69% reported experiencing at least one benefit from Making Tax Digital. These included preparing and submitting returns faster and increased confidence that they were getting tax right. Sixty-seven percent of businesses also felt Making Tax Digital had reduced the potential for mistakes in at least one aspect of the record keeping, preparing and submitting returns process.

As of December 2021, nearly 1.6 million taxpayers had joined Making Tax Digital for VAT with more than 11 million returns successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have voluntarily signed up to Making Tax Digital for VAT ahead of April 2022, and thousands more are signing up each week.

Since April 2019, businesses with a taxable turnover above £85,000 have already been required to follow Making Tax Digital, keeping digital records and filing VAT returns using Making Tax Digital compatible software.

In July 2020, it was announced that all VAT-registered businesses must file digitally through Making Tax Digital from April 2022, regardless of turnover. HMRC is now reminding businesses below the £85,000 threshold of the steps which they need to take to be ready.

HMRC have issued the following guidance to taxpayers who may have received COVID-19 grants during the 2020-21 tax year.

“If you claimed Self-Employment Income Support Scheme (SEISS) or received Coronavirus Job Retention Scheme grants, you’ll need to include details of all the taxable coronavirus support scheme payments you received during the 2020 to 2021 tax year.

“If you are employed and received Coronavirus Job Retention Scheme (furlough) payments during the 2020-21 tax year, you will need to enter your earnings and Income Tax as stated on your P60. Your P60 will include any furlough payments you received up to 5 April 2021, so you do not need to include furlough payments on your tax return.

“If you are self-employed or in a partnership and received any coronavirus financial support, you will need to declare it on your Self-Assessment tax return.”

SEISS grants you may have received during 2020-21 include:

• SEISS 1: 13 May 2020 to 13 July 2020
• SEISS 2: 17 August 2020 to 19 October 2020
• SEISS 3: 29 November 2020 to 29 January 2021

Grants received after 5 April 2021 will need to be declared as taxable income in the current tax year, 2021-22.

Apart from the furlough and SEISS grants you will also need to declare grants received from the following support schemes:

You need to report grants and payments from COVID-19 support schemes. These include:

• test and trace or self-isolation payments in England, Scotland and Wales
• Eat Out to Help Out
• Coronavirus Statutory Sick Pay Rebate
• Coronavirus Business Support Grants

Coronavirus Business Support Grants

These are grants or payments made by one of the following:

• local authorities
• devolved administrations
• any other public authority

They are also known as local authority grants or business rate grants and in all cases are taxable.

Examples of these grants in England include:

• Small Business Grant Fund
• Retail, Hospitality and Leisure Grant Fund
• Local Authority Discretionary Grant Fund
• Fisheries Response Fund

Examples of these grants in Wales include:

• Welsh Government Business Grants (Grants 1 & 2)
• Economic Resilience Fund

Examples of these grants in Scotland include:

• Business Support Fund
• Newly Self-Employed Hardship Fund
• Creative, Tourism & Hospitality Enterprises Hardship Fund
• Pivotal Enterprise Resilience Fund
• Aquaculture Hardship Fund
• Sea Fisheries Hardship Fund

Examples of these grants in Northern Ireland include:

• Small Business Support Grant Scheme
• Retail, Hospitality, Tourism and Leisure Grant
• other business-related coronavirus emergency and hardship funds

If you need more advice regarding which grants need to be declared as income, please call. We can help.

£100,000 – Loss of income tax personal allowance

Your income tax personal allowance – £12,570 for 2021-22 – will be reduced by £1 for every £2 your adjusted net income exceeds £100,000.

If your projected earnings for the current tax year are expected to be in excess of £100,000, perhaps for the first time, you still have three months to consider planning options to help you avoid this potential reduction in your personal allowance for 2021-22.

It is worth considering ways to avoid this as the effective rate of income tax you will pay if your earning fall between £100,000 and £125,140 is 60%. This is because as your personal allowance reduces, you not only lose the tax relief this has previously afforded, but the increase in taxable income will be subject to higher rate tax.

If you estimate that you may be affected by this loss of personal allowance, please call so we can help you consider your tax planning options.

£50,000 – Payback of Child Benefit payments

If either parent’s taxable income exceeds £50,000, HMRC will be entitled to a full or part-repayment of any Child Benefits (CBs) they may have received during the current tax year.

CBs will be repayable at the rate of 1% of the amount received for every £100 of income in excess of the £50,000 limit. This means that once income is in excess of £60,000, all CBs received will be recovered.

If affected, you can cancel receipt of future CBs, but this may not be advisable for NIC reasons.

HMRC will make a tax charge called the High-Income Child Benefit Charge (HICBC) to recover any CBs repayable. The parent with the highest income in excess of £50,000 will have to declare their need to repay CBs by submitting a self-assessment tax return.

If you are affected by this HICBC and are usure what you need to do, please call, we can help with any filing obligations.

£37,700 – Income subject to tax at higher rates

If your taxable income, after deducting your personal allowance, exceeds this amount you may be subject to income tax at higher rates.

There are strategies that may reduce this higher rate tax charge and keep you within lower rates of tax.

Please call so we can help you consider your options.

Please note that regional differences may apply where assemblies set their own income tax rates.

1 January 2022 – Due date for Corporation Tax due for the year ended 31 March 2021.

19 January 2022 – PAYE and NIC deductions due for month ended 5 January 2022. (If you pay your tax electronically the due date is 22 January 2022).

19 January 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2022.

19 January 2022 – CIS tax deducted for the month ended 5 January 2022 is payable by today.

31 January 2022 – Last day to file 2020-21 self-assessment tax returns online.

31 January 2022 – Balance of self-assessment tax owing for 2020-21 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2021-22.

1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

19 February 2022 – PAYE and NIC deductions due for month ended 5 February 2022. (If you pay your tax electronically the due date is 22 February 2022)

19 February 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2022.

19 February 2022 – CIS tax deducted for the month ended 5 February 2022 is payable by today.

As you will see from the tax diary notes this month, there are two significant tax payment deadlines this month.

• 1 January 2022 – Companies with a 31 March 2021 year end date will need to settle their Corporation Tax payment on or before this date.
• 31 January 2022 – Taxpayers who are subject to self-assessment will need to pay any underpaid tax and NIC for 2020-21 plus any first payment on account for 2021-22.

Clients reading this reminder who need to know how much to pay or reference numbers to quote should contact us asap.

And if you cannot make payment in full, on the due date, you could contact HMRC to ask for more time.

You can make your own Time to Pay arrangement using your Government Gateway account, if you:

• have filed your latest tax return
• owe less than £30,000
• are within 60 days of the payment deadline
• plan to pay your debt off within the next 12 months or less

Call the Self-Assessment helpline if you cannot make your own Time to Pay Arrangement online, for example, if you owe more than £30,000 or need longer to pay.

Self-Assessment Payment Helpline
Telephone: 0300 200 3822
Monday to Friday, 8am to 4pm

For other taxes, contact the Payment Support Service, 0300 200 3835.