Making Tax Digital is going to radically change the administration of tax in the UK. By 2020, every individual and business will have access to a digital tax account and the annual tax return will have been abolished.
 

Background

At the 2015 Spending Review the government announced it would invest £1.3bn to transform HMRC into one of the most digitally advanced tax administrations in the world. There were three objectives underpinning the announcement:
  1. The government was keen to see a reduction in the tax gap and an increase in tax yield.
  2. It wanted tax to be simpler for individuals and businesses to get right first time, thereby reducing the scope for errors contributing towards the tax gap.
  3. Lastly, it wanted the changes to result in sustainable cost savings at HMRC.
Against that backdrop, what is the impact of MTD going to be on individuals and businesses?
 

Individuals

Individuals will have a Personal Tax Account, accessible via a digital device of their choice, at any time of their choosing. Over 8m people have already signed up.

HMRC talks in terms of the Personal Tax Account being similar to online banking, in that individuals will be able to check their tax account for a personalised picture of their tax affairs, supported by secure messaging and webchat for help with a tax problem.

At the moment HMRC receives data from a wide range of sources and holds it on separate stand-alone systems, asking people to complete tax returns and enter figures it already knows. Moving forward HMRC is going to pre-populate more of this information within Personal Tax Accounts, to ease the ‘reporting burden’ and the scope for mistakes.
 

Businesses

HMRC believes avoidable errors and carelessness by businesses constitute £8bn of the tax gap.

Making Tax Digital is going to mean mandatory digital record keeping and the submission of quarterly updates to HMRC, followed by an End of Year declaration. Businesses and landlords will need to acquire MTD compatible software to store their accounts information, ready for onward transmission to HMRC.

There are different timelines for businesses and landlords to comply with MTD, which can be accessed here

There are also a limited number of exemptions to MTD which can be read about here

Details on what information needs to be uploaded can be accessed here.
 

Can we help?

If you have any questions about Making Tax Digital please contact our Head of Technical Research, Guy Smith, on 0345 223 2727 or at g.smith@abbeytax.co.uk.