Making Tax Digital
The government are committed to reducing burdens for taxpayers and building a transparent and accessible tax system fit for the digital age. As part of the Budget 2015, the government set out the vision for a transformed tax system and its intentions to revolutionise the reporting process for taxpayers
Due to the scale of the changes, HMRC have issued a collection of consultations around specific elements of the Making Tax Digital (MTD) reforms. These initial 6 consultations will run until 7th November 2016.
It is not really a case of whether this will happen, but more about how, so we encourage you to get involved with the consultations and keep an eye on how the developments will impact you.
The initial reports under the banner of ‘Making tax digital’ suggested ‘digital tax accounts’ an online platform enabling taxpayers and businesses to see all of the information HMRC is holding about them, such as employment income, pension income and bank and building society interest, which will all be prepopulated.
Businesses will be required to use software or Apps to keep records of their income and expenditure, as this data will eventually feed straight into the digital tax account. The suggestion is that taxpayers will need to update and approve the figures in their digital tax accounts every quarter.
From April 2018, and phased in by 2020, businesses (initially unincorporated), including everyone who is self-employed and those letting out property, will update HMRC at least quarterly where it is their main source of income. HMRC and other parties are suggesting that the returns will be possible with an app or software.
MTD is possibly one of the hottest topics around right now and primarily due to the uncertainty of what this may mean in the future. Could it save us all time and money or is it another mountain of red tape for the small business owner?
What is the next step?
Last month, HMRC published six consultation documents on MTD. The six consultations set out detailed plans on how HMRC propose to make tax digital and to simplify the tax system.
The six consultations initially issued are around the follow subject areas:
- Bringing business tax into the digital age – covers record keeping software, providing updates, end of year activity and exceptions
- Simplifying tax for unincorporated businesses – including changes to basis periods, extending cash basis accounting and reducing reporting requirements for unincorporated businesses
- Simplified Cash Basis for unincorporated property businesses – including non-resident landlords and those with furnished holiday lettings
- Voluntary Pay As You Go – considering if taxpayers can pay what they want, when they want, subject to the normal payment on account rules
- Tax administration – covering the compliance including penalties and interest
- Transforming the tax system through the better use of information
HMRC are keen to obtain views and opinion, so have produced a document titled ‘An Overview for small businesses, the self-employed and smaller landlords’, that provides an easier way to respond to the consultations. You can read more by clicking here
MTD could certainly impact certain groups in different ways including individuals, landlords, start up businesses, Non-VAT registered businesses, and also impact the cashflow of many.
We are encouraging all our clients to get involved with the consultation and look to influence the direction of MTD considerations in the future.