Making Tax Digital – consultation responses

01 February 2017

Following extensive consultation, with more than 3,000 responses over the last eight months, HMRC has issued in-depth details on digitising the tax system.

Alongside draft legislation, HMRC has published its responses to the six consultation documents issued in August 2016. After listening to the concerns of businesses and agents, HMRC has confirmed that under Making Tax Digital:

  • businesses will now be able to continue to use spreadsheets to record receipts and expenditure, which they can then link to software to automatically generate and send their updates to HMRC - this was requested by a wide range of stakeholders, particularly small businesses and the Treasury Select Committee
  • free software will be available to the majority of the smallest businesses
  • businesses that cannot go digital will not be required to do so
  • all self-employed businesses and landlords with a turnover under £10,000 a year will not have to keep their records digitally or make quarterly updates, but can do so if they wish
  • the option to account for income and expenditure on a simple ‘cash in, cash out’ basis will be extended, helping an extra 2.5 million self-employed businesses and unincorporated landlords
  • charities will not have to keep their records digitally or make quarterly updates
  • customers will have at least 12 months to become familiar with the changes before any late submission penalties will be applied; following feedback from respondents, HMRC will also consult again in the spring on a new penalty model
  • HMRC will pilot these digital systems with hundreds of thousands of businesses before rolling them out to ensure the software is user friendly, and to give businesses and landlords time to prepare and adapt.

A summary of feedback, the government’s decisions and HMRC’s next steps are set out in the six individual consultation response links below.

HMRC has also published a useful overview of the responses which draws out the key conclusions from each of the consultations.

 

Bringing business tax into the digital age - summary of responses

Tax administration - summary of responses

Transforming the tax system through the better use of information - summary of responses

Voluntary pay as you go - summary of responses

Simplifying tax for unincorporated businesses - summary of responses

Simplified cash basis for unincorporated property businesses - summary of responses

 

Legislation

The government will legislate in Finance Bill 2017 for the first part of the Making Tax Digital: Bringing Business Tax into the Digital Age reforms. This will include the primary legislation required to commence the Income Tax elements of these reforms from April 2018.

The government published in draft on 31 January 2017 the core primary legislation required to implement these reforms. A final version of these provisions and the remaining primary legislation will be published in Finance Bill 2017. At that time, the government will also publish, in draft form, the accompanying secondary legislation required to implement these reforms for Income Tax.

Bringing Business Tax into the Digital Age: legislation overview

Digital reporting and record keeping for business: Income Tax

 

CIPP comment

As these consultations are specific to certain MTD elements and groups, they will not all be of relevance to everyone. The Policy Team will be reading the response documents and draft legislation in detail to assess the areas relevant to payroll professionals and employers in general, so there will be more information to come on the practical implications of these reforms.