Making Tax Digital (MTD)

Making Tax Digital (MTD)

After delays for the referendum and for a change of Prime Minister, HMRC has finally published, not just one consultation document, but six! They outline the details of its digital tax strategy and seek the views of taxpayers and their advisers. The deadline for any responses is 7th November 2016; that’s in just four weeks time!

Many tax and accounting professionals believe that the timetable for implementing MTD is “worryingly short” and should be delayed by at least a year.

The consultation documents detail what will be a major change in how we all interact with HMRC. They are written to emphasise the advantage to taxpayers of having certainty over their tax obligations part way through the tax year, rather than at the end. Going digital will abolish the annual tax return as we know it by 2020, replacing it with a personalised digital service through which taxpayers will be able to send and receive information to HMRC at the click of a button.

It strikes many that this new digital tax regime is another shift of the administrative burden of our tax system still further away from HMRC and on to the taxpayer and their advisers. This will enable more tax to be collected, more cheaply and with fewer staff.

The current timetable for implementation will see:

• unincorporated businesses first off the starting line in April 2018;
• by concession businesses and landlords with income of less than £10,000 per annum will be exempt; and
• those in the next band up from £10,001 to £ ‘upper threshold’ (yet to be advised) will be delayed until April 2019;
• and then Corporation Tax (incorporated businesses) from April 2020.

For partnerships and Limited Liability Partnerships (LLP’s) the ‘nominated partner’ will be responsible for fulfilling the obligations under MTD on behalf of all the partners (or members, if LLP). In the same way those who jointly let property will have to nominate an individual to be the ‘nominated individual’ with all the reporting responsibilities.

Frank Haskew, head of the ICAEW tax faculty, said “We want to work with HMRC to build a digital tax system that small businesses will want to use and see value in, rather than being a system they are forced to use and which adds to their costs”.

Chas Roy-Chowdhury, Head of Taxation at ACCA, said “The penalty regime for tax has always been driven by return deadlines, with fixed “drop dead” trigger points built into the timetable. But under MTD that anchor point for the process disappears.” He adds that “the whole basis of compliance promotion will have to be revisited.”

We are watching closely and will report again on any future developments. Meanwhile you should be starting to think how your business can meet its obligations for quarterly updates in addition to the normal year-end adjustments.

If you would like to discuss this in more detail please contact our Tax Partners Steve Crompton or Chris Barrington on the details below:

Steve Crompton
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394

Chris Barrington
Tax Partner
direct dial: 01942 292505
mobile: 07730 436070