It’s hoped that paying tax will become less burdensome for British businesses under plans for a 21st century tax system detailed by HMRC today.
Six consultation documents, which seek views on HMRC’s Making Tax Digital programme to digitalise the tax system, are being unveiled as HMRC also announces that 1.3 million small businesses will be able to benefit from Making Tax Digital without needing to update HMRC quarterly or keep their records digitally.
The benefits of Making Tax Digital include:
- cash-basis accounting so that thousands more will be able to pay tax based simply on the difference between money they have taken in and what they have paid out, meaning tradesmen will pay tax on cash received rather than invoices issued,
- prompts and alerts to help businesses get tax right and giving advice on tax reliefs they might be missing out on,
- greater certainty over tax bills so businesses don’t have to wait until the end of the year to find out how much they have to pay.
The decision to exempt the smallest businesses and landlords from digital record-keeping and quarterly updates follows months of constructive engagement with business and agent groups.
In the the six consultation documents the government says it is also considering deferring digital record-keeping and quarterly updating for a further group of small businesses and will explore options to assist businesses with the transition. Finally, the consultation documents confirm that those who cannot go digital will not be required to.
Financial secretary to the Treasury, Jane Ellison MP, said: “We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans. This new system will make the UK’s tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.
“By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first.
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