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Making Tax Digital

Making Tax Digital is the Government initiative to deliver a fully digitised tax service by 2020.Although recent political changes have potentially curtailed the plans and there is speculation in the Accountancy industry as to whether it will be implemented in the specified time.

The latest Cabinet reshuffle after the snap election has seen a number of Ministers with a good understanding of the initiative, as well as the work needed to implement Making Tax Digital, move on. This comes with further news of two key people leaving HMRevenue & Customs recently. Additionally, the Finance Bill of 2017 was cut down in length by three quarters just before the snap election, and parts removed include those which largely detailed how both businesses and individuals will implement the new system.

Alongside the political uncertainty, theconsultation period has just closed and there is concern that there will not be enough time to implement any of the accepted changes before the April 2018 deadline whenunincorporated businesses, landlords and the self-employedwith turnover above the VAT registration threshold will have to start reporting quarterly.

While the consensus is that this is a good initiative and Making Tax Digital on a whole is a positive step forward, there is concern that the deadlines are too tight. Software providers will need to adjust their systems to incorporate the requirements, which is less straightforward than some decision makers realise.

How will it work?

Taxpayers with self-employment or property income will need to submit information online via a software provider of your choice. The information will be a summary of your income and expenditure data each quarter.

HMRC have confirmed that they will not be developing their own software. They are working closely with a number of providers in the consultation period to ensure that the software providers have enough information before the deadline to update their software to incorporate the changes needed, so that users will be able to submit all necessary data.

When will it start?

The initiative is due to start in April 2018 for certain businesses and individuals who are subject to income tax, with the remainder to be brought in from April 2019. Corporation tax reporting is expected to be added in 2020.

What do you need to do?

It might be a good idea to consider your options for digital software providers if you don't already have one. We can help you with this choice, if you would like some advice. We'll update you with any relevant information as soon as we have it.