UK and International Tax news
Making Tax Digital Update
Wednesday 29th July 2020
HM Treasury and HMRC have recently issued their corporate report on “Building A Modern Trusted Tax Administration System”.
In the Chancellor’s March 2020 Budget, he highlighted the government’s intention to create ‘a tax system fit for the challenges and opportunities of the 21st century’. The world has changed immeasurably over the last two decades, and the rapid growth of information and communications technologies and rising public expectations of world-class customer service mean that the UK both can and must have a fully digital tax system able to support taxpayers across the full range of their needs.
The government believes that now is the right time to plan the extension of Making Tax Digital [MTD], as follows:
- from April 2022, MTD will apply to all VAT-registered businesses for their VAT obligations;
- from April 2023, businesses and landlords with business income over £10,000 per annum which are liable for Income Tax will need to keep digital records and use software to update HMRC quarterly through MTD;
- to ensure that the MTD approach also evolves for those businesses that have incorporated to become companies, the government will be consulting later this year on the design of what the system should look like for Corporation Tax.
According to HMRC, with MTD for Income Tax in place, they will have access to up-to-date business information no more than four months old for up to four million small businesses and landlords. This should allow for better targeted policy responses and makes the tax administration system more resilient and effective in responding to future crises.
The extension of MTD should not create any additional tax liabilities for businesses, nor will it change when tax is paid for any businesses or landlords in scope of the extension. However, the government recognises that these are important steps forward. In taking these next steps of MTD, HMRC plans to engage widely with the businesses affected, and ensure that implementation plans are well designed to support the transition. This work will draw on everything that has been learned from implementation of the VAT service to date.
The extension of MTD is part of the Government’s ten year roadmap strategy which will include further reforms in the period to 2030 to digital reporting, tax payments, and tax administration.
If you would like more detail on the MTD Roadmap, please contact Keith Rushen on 0207 486 2378.Contact Us