Making Tax Digital (MTD) is a UK government initiative that sets out a vision for the 'end of the tax return' and a 'transformed tax system' by 2020. HM Revenue and Customs (HMRC) states that the main goal of MTD is to make tax administration more effective, more efficient and simpler for taxpayers.
HMRC is implementing the initiative and is working closely with accounting software developers to ensure that taxpayers are able to make the switch to digital tax. The outlined changes apply to a wide range of taxpayers, including most businesses, micro-businesses, self-employed people and landlords, as well as individual taxpayers.
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Quarterly tax returns
Under MTD, taxpayers will send HMRC summaries of their income and expenditure at least four times a year. HMRC says this will enable a more ongoing and accurate projection of tax due, as opposed to the current system of one tax bill at the end of the year. To do this, taxpayers will need to integrate their accounts with software in some way. HMRC's 2017 consultation response stated that spreadsheets can be used if they can meet with HMRC's technical requirements. However, many taxpayers will use more comprehensive accounting software to avoid the complications of linking a spreadsheet to their digital tax account.
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Time scale for implementation
Along with a number of clauses, MTD was removed from the Finance Bill ahead of the 2017 general election leading to speculation that MTD had been dropped altogether. However, as yet, HMRC has yet to comment on any changes to the following time scale for implementation:
Uncertainty over MTD
In a survey conducted by FreeAgent, one of the accounting software developers involved in beta testing MTD with HMRC, 84% of respondents thought there was a lack of information about the initiative. HMRC has provided documentation giving an overview of the initiative, but until legislation is set in stone the finer details of MTD, for example, exactly how those exempt from MTD will report their finances, remain unclear.
Exemptions
HMRC has confirmed that the following groups will be exempt from the initiative:
- The 'digitally excluded', or those who cannot use digital tools for reasons of religion, age, disability, remoteness or any other reason
- Charities, (although trading subsidiaries of charities will not be exempt)
- Unincorporated businesses and landlords with annual sales below the £10,000 threshold
Source of the article : Wikipedia
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