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Test run for Making Tax Digital

The UK tax body HMRC is inviting customers - including businesses and their agents - to start testing a new way to report income and expenses online.

The pilot brings the launch of Making Tax Digital (MTD) another step closer. Once it is fully up and running, Making Tax Digital will bring in online reporting and quarterly updating - and mark the end of the annual self-assessment process.

HMRC is starting small with this pilot, but it says: "As soon as the new service has been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join as well as any previous quarters."

According to AccountingWeb, the trial is only aimed at sole traders or tax-payers with a rental property - anyone with other sources of income will not be able to participate at this stage.

A Treasury select committee report published in January raised concerns about an "invitation-only approach" to testing and said a pilot scheme must be "substantive and wide-ranging".

However, in a letter to the committee in March, Jane Ellison, Financial Secretary to the Treasury, said there will be a "large scale public pilot" and an HMRC spokesperson said the programme would be piloted with "hundreds of thousands" before being rolled out.

At different stages of the pilot, customers will help HMRC develop and improve the new service by:

  • Using accounting software to record their business income and expenses;

  • Sending summary reports of their income and expenses direct from their digital records quarterly or more often if they choose;

  • Signing up to go paperless.

Customers who aren't invited to take part in the pilot at the beginning won't be able to start sending quarterly reports to HMRC immediately, but they can:

  • Start to use accounting software to keep their records if they don't already;

  • Check with their software supplier, or agent, that any software they use, including spreadsheets, is compatible with quarterly reporting.

HMRC will publish a list of software suppliers who have developed compatible software and registered with them later in the year. Some of this software will be free.

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