Download the full outcome
Detail of outcome
Respondents to this consultation overwhelmingly support the move to a digital tax system. The main concerns raised were about:
- the pace of change
- the capability of the smallest businesses and those who struggle with digital technology to adapt
- burdens on businesses
- agents’ ability to access digital services to support their clients
- data security when using third party software
Key decisions include:
- businesses will be able to continue to use spreadsheets for record keeping, but they must ensure that their spreadsheet meets the necessary requirements of Making Tax Digital for Business - this is likely to involve combining the spreadsheet with software
- businesses eligible to use ‘three line accounts’ will be able to submit a quarterly update with only three lines of data (income, expenses and profit)
- free software will be available to businesses with the most straightforward affairs
- the requirement to keep digital records does not mean that businesses have to make and store invoices and receipts digitally
- activity at the end of the year must be concluded and sent either by 10 months after the last day of the period of account or 31 January, whichever is sooner
- charities (but not their trading subsidiaries) will not need to keep digital records
- for partnerships with a turnover above £10 million, Making Tax Digital for Business is deferred until 2020
The government will need to consider further issues such as the initial exemption threshold and deferring the changes for some small businesses. Given the range of views expressed on this matter from respondents to the consultation, the government will take more time to consider these issues alongside the fiscal impacts.
HMRC has published draft legislation together with a tax information and impact note.
At Budget 2015, the Government set out the vision for a transformed tax system and in December 2015 launched the Making Tax Digital Roadmap, outlining more detail about what the transformed tax system will look like by 2020.
Because of the scales of these changes there is a lot we need to ask people about. We have published 6 consultation documents, each focusing on specific customer groups or elements of the Making Tax Digital reforms.
Focus of this consultation
This consultation considers how digital record keeping and regular updates should operate.
The proposals allow tax to be integrated into day to day business activity and enable businesses to provide a single update for multiple taxes, while offering maximum flexibility - for example as to when a business makes accounting adjustments or claims for allowances and reliefs - so that tax requirements fit in with existing business practices.
This consultation will be of interest to all businesses, the self-employed and landlords, as well as agents, business representative bodies, software developers and insolvency practitioners.