On 15 August 2016 HMRC published six consultation documents, together with a summary document, under the Making Tax Digital (MTD) initiative. In HMRC’s own words, the overall objectives of MTD are for the tax system to become ‘more effective, more efficient and easier for taxpayers’.
The consultation documents cover the following topics:
- bringing business tax into the digital age;
- simplifying tax for unincorporated businesses;
- applying the cash basis to unincorporated property businesses;
- a voluntary pay as you go tax payment system;
- changes to tax administration, including penalties;
- making better use of information by automating the collection of data.
Whilst some of the proposed changes appear to be pragmatic and helpful suggestions, others provide much cause for concern.
Moore Stephens has recently submitted representations to HMRC in response to the consultation documents outlining our concerns for both businesses and agents.
The main concerns raised in our representations include the following:
- currently the proposed changes, including the introduction of quarterly reporting, are intended to apply to income tax and NICs from April 2018, VAT from April 2019 and corporation tax from April 2020. This may be deferred by one year for the smallest businesses within the new regime. We do not consider that this will provide businesses or agents with enough time to make the necessary changes to their internal infrastructures before the rules are implemented.
- the requirement to make quarterly submissions, in addition to an End of Year Activity report, might prove too onerous for many taxpayers and we are not convinced that the information acquired through quarterly reporting will be of great value for taxpayers with more complex tax affairs.
- the Government suggests that businesses with a turnover/gross income of less than £10,000 will be exempted from MTD, however we are not convinced that this limit is sufficiently high as many taxpayers above this threshold might not have the capacity to cope with the new requirements.
- businesses entering the regime will incur significant costs, such as IT and staff costs, and it is important that adequate support be provided to businesses by the Government to ease this transition.
Please visit https://www.gov.uk/government/collections/making-tax-digital-consultations for further information on the consultation documents.
Our detailed representations that were submitted to HMRC in response to the consultations can be accessed here.
For further information, please contact your usual Moore Stephens adviser.