Making tax digital – nothing to worry about
Readers will be relieved to note that their professional advisors and other interested organisations, have recently lobbied HMRC to temper their agenda for making tax digital (MTD).
In case you have not heard of MTD, HMRC intend to require businesses with income over a de minimis limit (presently set at £10,000), to upload summary accounting data on a quarterly basis from April 2018. The idea is to abolish the annual tax return and “push” all of the information that is required to work out our tax liability to our MTD account with HMRC.
This will involve all affected businesses (including those that let property) to keep their accounting records electronically, and more particularly, in a form that will allow data to be uploaded to HMRC.
Advisors have lobbied for an increase in the £10,000 limit, and a rethink on the quarterly upload of data.
The potential for lumbering small businesses and landlords with yet more red tape is one concern, as is the virtual enforcement of digitising accounting records – many clients prefer to use spreadsheets or manual record keeping.
A HMRC spokesperson, Jim Harra, published the following rebuttal in the Financial Times on 10 November:
HM Revenue & Customs will not be asking anyone to file accounts five times a year, nor will we be introducing in-year quarterly payments. Businesses will simply send in-year updates to HMRC using information collated automatically by the same software used to record day-to-day transactions. This will help businesses pay the right amount of tax, taking away the need to put things right at a later date.
Businesses already keeping their records digitally should see no additional costs at all. Free software will be there for businesses with the most straightforward affairs, and we are looking at additional assistance with transitional costs.
We fully recognise that this is a significant change for some businesses, which is why we’re introducing it gradually as well as exempting some of our smallest businesses, but at the heart of digital transformation is a simpler, more efficient tax system that frees business people from red tape and form-filling.
Based on past experiences of HMRC’s digitalisation of systems, there may well be delays in the implementation of MTD, but HMRC do seem to be resolute in their intention to scrap the annual tax return and have us upload data in order to quantify annual tax liabilities.
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