Overview of ‘Making Tax Digital’
Making Tax Digital (MTD) is HMRC’s plan to transform the current tax system into a paperless online system.
As part of the implementation plan for MTD, HMRC has recently published six consultation documents, which target specific customer groups and include proposals for modernising the way individuals and businesses pay tax.
The six consultations consider the following:-
- Bringing business tax into the digital age – how digital recordkeeping and reporting should operate;
- Simplifying tax for unincorporated businesses –reforms to the basis period rules for the self-employed; extending cash basis accounting to larger businesses; reducing reporting requirements for businesses, and removing the need to distinguish between capital and revenue for the cash basis method;
- Simplifying cash basis for unincorporated property businesses – should cash basis extend to landlords;
- Voluntary pay as you go – looks at the options for taxpayers to manage their voluntary payments and the best way of dealing with repayments;
- Tax administration – the administration framework will need to change. This consultation also has proposals to simplify interest penalties for late payments;
- Transforming the tax system through the better use of information – how HMRC can make better use of information received from third parties to reduce end-of-year under-payments and over-payments and eventually remove the need to complete tax returns.
There is still a long way to go but MTD is set to transform our tax system - for better or worse?
Date: 28th September, 2016
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