At Budget 2015, the Government set out their proposed ‘Making Tax Digital’ project - plans to move to a fully digital tax system by 2020, with the aim of making the tax system more efficient. As part of the implementation plan for Making Tax Digital, HMRC have published six consultation documents, covering a variety of tax issues facing self-employed individuals, landlords and unincorporated businesses. HMRC have stated that due to the scale of the changes, there is much to consult on – we would therefore expect further consultation to follow for large businesses, although the timing of this is not yet clear.
The six consultations released are:
The Government previously announced at Autumn Statement 2015 that most businesses, self-employed people and landlords would need to report on their tax affairs at least quarterly to HMRC via their digital tax account. This consultation asks for views on how this record keeping and reporting should work in practice.
This consultation proposes changes to how the self-employed map accounting periods onto the tax year. It also proposes to extend cash basis accounting to larger businesses to reduce reporting requirements, and to remove the need to distinguish between capital and revenue for businesses using cash basis accounting.
To ease the transition to Making Tax Digital for those landlords who will be required to report at least quarterly, this consultation proposes the extension of cash basis accounting to landlords.
This consultation covers options for taxpayers who need to keep digital records to make and manage their voluntary payments, considers how voluntary payments will be allocated across the different taxes, and explores the best way of dealing with the repayment of voluntary payments. It also looks at the possibility that regular reporting will allow earlier repayments.
This consultation concerns aspects of the tax administration framework that will need to change to support Making Tax Digital. It also proposes an alignment of certain aspects of the framework across taxes, including simplification of late filing and late payment penalties.
HMRC proposes to make better use of information received from third parties from 2018 onward, to eventually remove the need for a tax return, reduce end of year over or underpayments, and provide greater transparency to taxpayers.
As well as these consultation documents, HMRC have released Making Tax Digital for Business - An overview for small businesses, the self-employed and smaller landlords, which contains a summary of the key points from the consultations and is specifically designed for small businesses and landlords.
Comments on these consultations are expected by 7 November 2016, and we will publish further detail on their implications for taxpayers in the next few weeks.
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