Making Tax Digital (MTD) is the government's flagship project to bring tax compliance into the twenty-first century. Starting with the digitalisation of VAT returns for businesses with a taxable turnover above the VAT threshold next month, HMRC intend that eventually all tax records and tax returns for individuals, businesses and trusts will be captured digitally. This means that taxpayers will either need access to commercial software which is compatible with HMRC's own interface or will need to appoint a professional agent to deal with their filing for them.
While a project aimed at streamlining and improving our current complex and frequently frustrating tax compliance system is to be commended, one major issue is that not enough people are aware of these impending changes. A recent survey conducted by the British Chamber of Commerce revealed that nearly one-fifth of businesses were aware of the project in name only, but had no idea of timescales and had not made any preparations to update their procedures.
Going forward MTD will require partnerships, self-employed individuals, trusts and those with property income to make digital quarterly submissions of their income and expenses in addition to their annual tax return. There is likely to be an exemption for those with income below a specific threshold but this has yet to be quantified.
With the introduction of MTD set to coincide almost exactly with the UK's forthcoming withdrawal from the EU HMRC is anticipating extremely high levels of enquiries. Telephone answering times are likely to be extended and history tells us that software failures may be expected. Taxpayers can expect a bumpy ride.
With just weeks to go before the planned switch to the government’s ‘Making Tax Digital’ (digital book-keeping), the British Chamber of Commerce (BCC), is calling on officials to delay it due to widespread lack of knowledge that it is even about to happen.