In an effort to revolutionise the UK tax system, HMRC has identified its ‘four foundations’ which will result in the transformation of the tax system and enable them to remove the requirement for Tax Returns to be filed.
- Tax simplified: taxpayers should not have to give HMRC information it already has or can get elsewhere and it should be easy to check the information HMRC has received.
- Tax in one place: taxpayers will be able to see a full ‘tax picture’ of what taxes they pay and owe online, in their ‘digital account’ with HMRC. They will be entitled to set off overpayments of one tax against liabilities of another.
- Making tax digital for businesses: businesses will update HMRC quarterly with accounting information prepared digitally and HMRC will use this to enable accurate interim tax calculations.
- Making tax digital for individual taxpayers: enabling digital interaction with HMRC at any time and giving individuals a personalised picture of their tax affairs, along with prompts, advice and support.
MTD: Where are we now?
On 15 August 2016 HMRC published six consultation documents on Making Tax Digital. These consultations set out detailed plans on how HMRC propose to fundamentally change the method by which taxpayers, particularly the self-employed and landlords, send information to HMRC.
In November 2016 HMRC’s MTD consultation closed. Some respondents suggest there should be a MTD pilot scheme for larger business, more suggest a further exemption/delay in mandating small business to be part of the new regime. All have fears over the cost to business.
In January 2017 HMRC will publish their response to these consultations together with provisions to implement previously announced changes.
Two of the key changes proposed are:
- From April 2018, self-employed taxpayers and landlords will be required to keep their business records digitally and submit information to HMRC on a quarterly basis and submit an End of Year declaration within nine months of the end of an accounting period (accounting periods are typically 12 months long), effectively replacing the current tax return.
- HMRC will make better use of the information which they currently receive from third parties and will also require more up to date information from some third parties, such as details of bank interest. Employees and employers will see the updating of PAYE codes more regularly as HMRC use the data received from the third parties.
Whether MTD can be delivered on time and without costs to businesses…only time will tell.
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