Making tax digital (MTD) was first announced in March Budget 2015. It heralds the introduction of a modern tax system using digital technology e.g. smart phones enabling businesses to comply more easily with their tax reporting and compliance obligations. Arguably these changes are the most significant to be made to the operation of the UK tax system since the introduction of self-assessment in 1997.
In the Autumn Statement 2015, the government announced that, by 2020, it would require most businesses, self-employed people and landlords to keep track of their tax affairs digitally. This will involve updating their personal digital tax account with HMRC through the Government Gateway on a quarterly basis. It will engender a discipline for taxpayers to keep their paperwork up to date alongside issuing invoices to customers for the payment of goods and or services.
It does not mean, however, filing 4 Tax Returns per year as we understand is being reported in the Media but replaces the need for filing annual Tax Returns by keeping HMRC up to date more frequently. It should simplify the process as taxpayers are building up their reporting position throughout the year and reduce the pressure onfacing a year end cut-off point and receiving unexpected tax bills.
Making Tax Digital Consultation Documents
HMRC issued six detailed consultation documents on 15th August 2016 with closing date for comments due 7th November 2016. We will publish further details of the operation of MTD as they come to hand.