The benefits of Making Tax Digital include:
· Cash-basis accounting so that thousands more will be able to pay tax based simply on the difference between money they have taken in and what they have paid out, meaning tradesmen will pay tax on cash received rather than invoices issued
· Prompts and alerts to help businesses get tax right and giving advice on tax reliefs they might be missing out on
· Greater certainty over tax bills so businesses don’t have to wait until the end of the year to find out how much they have to pay.
The decision to exempt the smallest businesses and landlords from digital record-keeping and quarterly updates follows months of constructive engagement with business and agent groups. The government is also considering deferring digital record-keeping and quarterly updating for a further group of small businesses and will explore options to assist businesses with the transition. Finally the consultation documents confirm that those who cannot go digital will not be required to.
The Financial Secretary to the Treasury, Jane Ellison MP, said:
“We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans. This new system will make the UK’s tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.
“By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first.”
Mike Cherry, FSB National Chairman, said:
“Today’s announcement by the Financial Secretary to the Treasury Jane Ellison MP on quarterly tax reporting proposals is incredibly important. Together with the Chief Secretary David Gauke MP, we have seen real dialogue with the business community. The Government has listened to FSB representations on behalf of small businesses up and down the UK.
Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6 million small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3 million small firms and landlords will no longer be in scope. This means that half of the UK’s 5.4 million small businesses will not be affected by quarterly tax reporting. The expansion of cash accounting, a longer lead-in time for implementation and the offer of direct financial assistance will also help.
FSB will be submitting new evidence into the consultations announced today, and look forward to working with the Government and contributing to its Making Tax Digital agenda.”
Edward Troup, Executive Chair, HMRC, said:
“Making Tax Digital represents very significant change. It will bring the tax system into the 21st century and help make HMRC one of the most digitally-advanced tax administrations in the world. 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.
“There is still a lot to design and develop, and it’s important that we do this hand-in-hand with our customers and their representatives; these consultations are the next step in this process.”