HMRC’s Making Tax Digital (MTD), means a new joined up systems for HMRC and the majority of businesses and landlords will have to use software and apps in order to complete new tax obligations. The Roadmap is the document outlining HMRC’s vision for reform and the end of the Tax Return by 2020.

HMRC has identified its ‘four foundations’ which will result in the transformation of the tax system and enable them to remove the requirement for Tax Returns to be filed. [editorial note: tax returns will still be filed under MTD, they are to be called reports and declarations, instead of returns].

  • Tax simplified: taxpayers should not have to give HMRC information it already has or can get elsewhere and it should be easy to check the information HMRC has received.
  • Tax in one place: taxpayers will be able to see a full ‘tax picture’ of what taxes they pay and owe online, in their ‘digital account’ with HMRC. They will be entitled to set off overpayments of one tax against liabilities of another.
  • Making tax digital for businesses: businesses will update HMRC quarterly with accounting information prepared digitally and HMRC will use this to enable accurate interim tax calculations. [editorial note: businesses will have to make an end of year submission, which essentially means preparation of annual accounts that will need to reconcile to the quarterly returns. The quarterly reporting system attracts penalties for late submission and payment of tax] .
  • Making tax digital for individual taxpayers:  enabling digital interaction with HMRC at any time and giving individuals a personalised picture of their tax affairs, along with prompts, advice and support.

Timeline

HMRC have proposed the following timeline for implementing the digital tax system:

January - June 2016

  • Initial consultation on options to simplify the payment of taxes.
  • Taxpayers can see how their National Insurance contributions affect their State Pension through their digital account.
  • All of the UK’s 5 million small businesses and every individual taxpayer will have access to their own digital tax account, seeing information HMRC holds about them.
  • Webchat introduced to support PAYE taxpayers in their digital tax account.
  • Public consultation on the scope and operation of more frequent reporting of information by businesses to HMRC using digital tools.
  • Public consultation on third party information.
  • Testing starts for secure messaging between taxpayers and HMRC in their digital tax account.
  • Public consultation on simplifying HMRC’s tax administration.

July - December 2016

  • Testing starts for digital reporting of accounts by small businesses.
  • Bank and building society interest above the personal savings allowance included in tax codes for employees and pensioners.
  • Authorised agents able to manage their clients’ digital tax accounts.
  • Testing starts on using real-time information to show taxpayers how their personal allowances are shared between jobs and pensions.

January - June 2017

  • Testing starts for digital reporting of income from letting property.
  • New online billing system begins.
  • Taxpayers able to report additional sources of income through their digital tax account.

July - December 2017

  • Digital tax accounts show taxpayers an overview of their tax liabilities in one place.
  • Automatic tax code adjustments prevent PAYE under and overpayments.

January - June 2018

  • Interest paid by banks and building societies starts to be shown in digital tax accounts.

July - December 2018

  • Most businesses, self-employed and landlords start updating HMRC quarterly for income tax and National Insurance obligations through their accounting software.
  • Taxpayers who currently report their Child Benefit to HMRC no longer need to do so.

2019

  • Most businesses, self-employed and landlords start updating HMRC quarterly for VAT obligations through their accounting software.
  • Capital Gains Tax on the disposal of residential properties needs to be paid within 30 days.

2020

  • Most companies start updating HMRC quarterly for Corporation Tax obligations through their accounting software.
  • The full range of HMRC services are available through digital tax accounts.

Links

Our Making Tax Digital: index 
Details of consultations and Myth-buster etc.

External links:

HMRC's road map  

HMRC Case studies

 

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