Making Tax Digital – are you keeping up
24 March 2017
Making Tax Digital for Business reform is included in clauses and schedules Finance Bill 2017 which covers the following areas:
Income Tax
Scope - details of which businesses (including sole traders and landlords) will be in scope of the new requirements.
Entity and activity-specific exemptions - details of exclusions and exemptions for certain businesses and business activities.
Periodic updates - powers for HM Revenue and Customs (HMRC) to make regulations requiring persons and partnerships in scope of the new requirements to provide, at regular intervals, specified information about their income and expenditure.
End of period statement - powers for HMRC to make regulations requiring persons to provide specified information in relation to relevant periods for the purpose of calculating their taxable profits or losses.
Partnership return - powers for HMRC to make regulations requiring partnerships to provide specified information about their business in relation to a tax year, to facilitate the calculation of partners’ share of the taxable profits or losses.
Digital record-keeping - powers for HMRC to make regulations requiring persons and partnerships to keep and preserve specified records relating to their business in electronic form.
Electronic communications - further details of the provision which may be included in regulations in respect of electronic communications.
Digitally Excluded Exemption - details of who may be exempt from the new requirements because they are unable to engage digitally.
Further exemptions - powers for HMRC to make regulations exempting persons and partnerships from the new requirements which will include regulations providing for exemptions for businesses based on their annual income. It will be used to implement a one-year deferral of the requirements for businesses with annual incomes below the VAT threshold. It will also be used to implement a deferral of the requirements for partnerships with annual incomes of above £10 million. It will also be used to provide for exemptions in relation to businesses subject to insolvency proceedings.
Final declaration - the Bill includes provisions through which persons, subject to the new requirements, will finalise their liability to Income Tax and Capital Gains Tax. They will be able to make a ‘final declaration’ using their digital tools, through which they can finalise their affairs for a tax year. This will replace the need to file a tax return, provided they have submitted details of all their chargeable income through the final declaration.
Compliance powers - HMRC has a range of powers which allow it to check and investigate a person’s or partnership’s tax affairs. The Bill includes amendments to make HMRC’s existing compliance powers fit with the new processes described in Bringing Business Tax into the Digital Age.
Appeal powers - amendments to the Taxes Management Act 1970 to provide a right to appeal against a decision of the Commissioners about the application of any provision of regulations under schedule A1.
Consequential amendments – these are required to existing tax legislation in order to implement the policies set out in Bringing Business Tax into the Digital Age.
Full details of the update can be read on GOV.UK where the commitment to ensure full consultation on all Regulations relating to the delivery of Making Tax Digital can be found.