Details of an ambitious ten-year strategy to create a tax system fit for the 21st century have been released alongside Finance Bill legislation. With the rapid growth of information and communications technologies, the aim is to have a fully integrated digital tax system able to support taxpayers across the whole range of their needs.
There are three elements to the government’s strategy, outlined in the July report.
Making tax digital
At present, making tax digital (MTD) applies to businesses with a turnover above the VAT threshold of £85,000. These businesses are required to keep digital records and to file VAT returns using online software.
Recently announced plans will see MTD extended:
- From April 2022, the VAT filing requirements will apply regardless of turnover.
- From April 2023, MTD will apply to all taxpayers filing self-assessment tax returns where their annual business or property income exceeds £10,000.
Once self-assessment taxpayers are included within MTD, HMRC will have access to up-to-date, real time business information which is no more than four months old.
HMRC intends to expand its MTD pilot service from April 2021 to allow businesses and landlords to test the service well in advance of the requirement to join. A consultation later this year will look at how MTD is to be extended to limited companies.
Payment of tax
Although the report makes it clear the extension of MTD to self-assessment taxpayers will not initially see any change to when tax is paid, it then considers what might happen in the longer term. Tax payments could be brought into line with the increasingly real-time nature of tax reporting, with the change making it easier for many taxpayers and businesses to manage their cash flow.
Tax administration
Various suggestions are made under this heading. One very useful proposal is for the government to go ahead with a simplified registration process, so that a business need only register once with HMRC for all taxes.
With HMRC having had to quickly develop additional online systems and help for taxpayers during the Covid-19 pandemic, moving towards a more integrated, real time approach should make such interventions easier to manage in future.
Help and support for MTD can be found on the .GOV site and of course, you can contact our specialist team of Accounting & Business Advisory on 01142 664 432 or info@smhca.co.uk for further advice.
Comments are closed.