Making Tax Difficult, I mean Digital...
Making Tax Digital is an HMRC intiative launched by the government in the March 2015 budget.
It has the aim of simplifying the process of tax reporting, giving businesses, landlords and the self-employed a better experience in dealing with HMRC, bringing together systems with an easier to use approach that would also remove errors that cost the tax man an estimated £8bn per year. Stakeholders would have a unified tax account, with similar functioning and ease of navigation as online banking. Tax would be dealt with in one place you wouldn't report in different way for different taxes and HMRC would use the information it already holds and its access to 3rd parties such as banks meaning there would be less information asked for in returns. Returns would be quarterly, meaning large under- or overpayments should not build up and the tax picture should be real-time. The goal is to have a digitalised tax system by 2020, or at least was.
There have been a couple of developments lately which add to the already significant amount of uncertainty in the implementation of this project.
1) The Making Tax Digital (MTD) clauses were removed from the Finance Bill 2017 in the run up to the election. This means depending on the outcome of the election, the process could be carried on at the same pace as the original timetable, stretched out or even changed unrecognisably.
2) A delay was announced in the timetable so that now only those with turnovers of over the VAT threshold (£85k at time of writing), will be in scope when income tax reporting for MTD comes into force in April 2018. Now those businesses, landlords and sole traders under this threshold will be caught from April 2019. It is worth noting that if turnover is less than £10k there will be no need to comply unless you choose to. The plan is to digitalise VAT in 2019 and Corporation Tax in 2020 (PAYE via the real-time information (RTI) reporting is already reported digitally).
Although HMRC has as from April this year started "beta" testing of software with some selected agents and businesses, there is much misunderstanding about how VAT reporting for example will come across to the new quarterly reporting, transition arrangements etc.
Watch this space for any developments on the timetable or substance of MTD post-election, right now its something everyone should be aware of and preparing to adopt.