HMRC confirms that quarterly digital reporting will go ahead in 2018

The government announced in the Autumn Statement that it intended to publish its response to the Making Tax Digital consultations at some point in January, 2017, and true to its word it delivered on the promise. Following an extensive consultation process over the last 8 months – a consultation which generated over 3,000 responses – HM Revenue & Customs (HMRC) has published new information about how the UK’s self-employed community, small businesses and property landlords will benefit from the tax authority’s Making Tax Digital project.  

So what can we expect from the new digital taxation system when it is finally introduced in April, 2018? Well, according to the government, the new system will not only future-proof and modernise and future-proof what is widely regarded by accountants and businesses as a cumbersome and inefficient taxation system: it will also help millions of businesses to get their tax liabilities right at the first time of asking, without the need for submitting annual tax returns.  

Speaking about the government’s decision to press ahead with tax digitisation, Jim Harra, Director General of Customer Strategy and Tax Design at HMRC, said:

“We know that the majority of businesses want to get their tax right first time, but the latest tax gap figures show that too many find this hard, with more than £8 billion a year lost in tax as a result of avoidable taxpayer error by small businesses.”

“Making Tax Digital will help businesses to get their tax right first time; it will help reduce the likelihood of errors, lower the chance of unwelcome compliance checks and give them greater certainty that they are getting things right.”

“There were more than 3,000 responses to the consultations and I’d like to thank everyone for their time and effort. The appetite for digital services is growing and traditional paper-based processes make no sense in the 21st century where the vast majority use digital services.”

As well as giving the go-ahead to quarterly reporting, HMRC also published responses to six other consultation documents received in August. In the responses HMRC confirmed the following:  

  • Self-employed professionals and property landlords with a turnover less than £10,000 a year will not be obliged to keep digital tax records, although they can if they wish to do so.
  • HMRC said the ‘cash in, cash out’ basis for income and expenditure, where businesses pay the tax they owe based simply on the difference between money they have taken in and what they have paid out, will be extended for an additional 2.5 million self-employed firms and unincorporated landlords.
  • Charities will not be forced to maintain digital or quarterly tax records
  • Business which find they are unable to go digital with their tax reporting will not be legally forced to do so, and;
  • All taxpayers will have a minimum of 12 months to familiarise themselves with the digital tax system before any penalties are applied for late tax returns.

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