22 August 2016 11:45
HMRC consultation on Making Tax Digital
According to HMRC, paying tax is set become "less burdensome for British businesses" thanks to plans to create a digitised twenty-first century tax system.
In the 2015 Budget, the government announced plans to transform the tax system and in December 2015 HMRC published the Making Tax Digital Roadmap, explaining how this will be achieved.
Six consultation documents have just been published, inviting views on the Making Tax Digital plans, with HMRC estimating that 1.3m small businesses will benefit from not having to update HMRC each quarter or keep digital records.
Jane Ellison MP, Financial Secretary to the Treasury, said:
"We're committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans.This new system will make the UK's tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.
"By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first."
According to the government, Making Tax Digital will mean many more businesses will be able to benefit from cash-basis accounting (ie paying tax on cash received rather than invoices issued). New prompts will also help businesses to "get tax right" and claim tax reliefs they might be missing out on.
The decision to exempt the smallest businesses from digital record-keeping and quarterly updates follows "months of constructive engagement with business and agent groups," said the Government, which is considering extending the exemption.
Edward Troup, HMRC Executive Chair, said:
"Making Tax Digital will bring the tax system into the 21st century and help make HMRC one of the world's most digitally-advanced tax administrations. Going digital will abolish the annual tax return as we know it by 2020, replacing it with a personalised digital service through which taxpayers will be able to send and receive information to HMRC at the click of a button.
"There is still a lot to design and develop, and it's important that we do this hand-in-hand with our customers and their representatives. These consultations are the next step in this process."
Mike Cherry, FSB National Chairman, described the announcement on quarterly tax reporting proposals as "incredibly important". As a result of the changes announced, he said, half of the UK's 5.4m small businesses will not be affected by quarterly tax reporting rules. "The expansion of cash accounting, a longer lead-in time for implementation and the offer of direct financial assistance will also help," he said.