Make Tax Great Again! – Anticipated changes in respect of Making Tax Digital for Income Tax
Discussions have been in place regarding modernising the UK Tax system for several years, with VAT being the first of the UK Taxes to make the move with Making Tax Digital (MTD), rolled out in April 2019 for VAT registered…
Blog4th Aug 2020
Discussions have been in place regarding modernising the UK Tax system for several years, with VAT being the first of the UK Taxes to make the move with Making Tax Digital (MTD), rolled out in April 2019 for VAT registered businesses with turnover above the threshold of £85,000. From April 2022 MTD for VAT will be extended to all VAT registered businesses.
The government wants to ensure that the UK Tax system is keeping up to date with ever-changing technological capabilities, whilst offering both taxpayers and HMRC the benefit of real-time data.
Last week saw the Treasury set out the government’s plan regarding the future changes to the UK Tax system. The announcements focused around the modernisation and digitisation of the Income Tax system – a project known as MTD for Income Tax.
From April 2023 unincorporated businesses and landlords with turnover of £10,000 or more will be the first taxpayers captured under the anticipated MTD for Income Tax.
Initially the following compulsory changes will be introduced:
- Electronic record-keeping of all tax-relevant data, including accounting records.
- Quarterly electronic reporting to HMRC followed by an annual “final declaration” using compatible software
More regular reporting may lead to more frequent payments of tax, however that is not the current intention. The government believe that digital records are more accurate and will assist the taxpayer in keeping on top of their tax affairs.
One of the key criticisms of the recent COVID-19 support packages for self-employed individuals was that the financial support was based on historic data, in most cases more than 12 months old. Whilst we can all agree that we hope to never face a situation such as the COVID-19 crisis again, the implementation of MTD for Income Tax would enable the government to access data no more than three-months old.
It is expected that a consultation surrounding MTD for Corporation Tax will be published later in the year.
With a headcount of 50+ experts, our Business Advisory Group are preparing for a period of assisting clients with MTD for Income Tax as soon as more information becomes available. Specialising in the taxation of businesses and individuals together with our team of cloud accounting experts experienced in digital record-keeping and accounts production, we are well placed to ensure that all clients, new and existing, are guided through the reform as seamlessly as possible at every step of the way.
Our Indirect Tax team and Business Advisory Group directly oversaw the successful implementation of MTD for VAT for numerous clients ahead of the April 2019 roll-out and will be offering continued support to those affected by the compulsory MTD for VAT roll-out in April 2022. This experience with MTD implementation and prolonged period of remote working throughout the COVID-19 crisis puts our team in a strong position to support the move to a more digitalised system for Income Tax reporting.