Earlier this week HMRC published, jointly with HM Treasury, a five to ten-year vision for tax administration. As part of this, a future roadmap for Making Tax Digital (“MTD”) was also set out which will begin with extending MTD for VAT to VAT-registered businesses with turnover below the £85,000 VAT threshold from April 2022. The full message from HMRC is set out below. The Institute will continue to engage with HMRC on MTD and related matters to represent the views of our members.
“I am writing to let you know that today we have published, jointly with HM Treasury, a 5 to 10-year vision for tax administration. As part of this, we have set out a future roadmap for Making Tax Digital. There are links to the vision document Building a trusted, modern tax administration system and the Written Ministerial Statement for Legislation Day at the end of this message. I am very keen to work collaboratively and transparently with you in the period ahead to take forward today’s announcements.
There are links to the vision document Building a trusted, modern tax administration system and the Written Ministerial Statement for Legislation Day at the end of this message. I am very keen to work collaboratively and transparently with you in the period ahead to take forward today’s announcements. The full message from HMRC
I am proud of how HMRC has responded to the COVID-19 pandemic by delivering support in record time for individuals, businesses and the self-employed. I am also very grateful to the many organisations who have helped us with this work, and supported us so effectively during this period.
The pandemic has exposed the challenges that an out-dated tax administration system presents. A tax administration system which is more resilient and adaptable will offer greater flexibility and scope to provide targeted support to people and businesses in the face of a future national crisis. This period has emphasised the value of having access to real-time data and a more up-to-date overview of taxpayers’ financial position. Real-time data would have provided government with a more accurate picture of the trading and profit levels of the self-employed enabling support to be better targeted.
The vision document sets out the next steps we can take to address these issues. These include the next stages of implementation of Making Tax Digital. The roadmap provides certainty so that businesses and agents can plan ahead. It allows for lead-times and piloting, and does not require action in the near future. Making Tax Digital will be:
- extended to VAT-registered businesses with turnover below the £85,000 VAT threshold from April 2022 – 30% of these businesses have already joined voluntarily; and
- introduced for Income Tax Self-Assessment for businesses and landlords with income over £10,000 from April 2023.
In addition, we will consult in the Autumn on the detail of extending Making Tax Digital to incorporated businesses with Corporate Tax obligations.
We will also look at the long delay before the self-employed need to register and submit trading data. With earlier registration and information, it would have been possible to support those who recently set up in business, without exposing the scheme to fraud or organised criminal attack. This will form part of broader work to update the tax administration legislative framework.
Over the summer, we will hold further discussions with businesses and their representatives to develop and assure the estimated implementation and administrative costs of complying with Making Tax Digital. Our initial estimate is that the average additional cost of complying with Making Tax Digital is about £20 a year for each business, with a transitional cost to make the change-over of about £175. This includes efficiency gains in tax administration, but not the wider productivity benefits of going digital. This is an average within a broad range, as costs will differ significantly from business to business. Free, basic software products are available. We will firm up our estimates in the autumn following further input from stakeholders.
In March the Government published an assessment of the rollout of Making Tax Digital for VAT. Since 2019 over 1.4 million businesses have started using the service, submitting over 6 million returns. Evidence to date indicates that the anticipated benefits are being realised, with further evaluation planned. We have listened to feedback and are confident that today’s announcement provides businesses, landlords and agents with the certainty they need and adequate time to make the necessary preparations. We will gradually expand the pilot service for Income Tax to allow more businesses and landlords to test that the service is working as intended.
We will shortly initiate discussions with stakeholders about the vision and next steps. We are keen to hear views from everyone with an interest, and will ensure our stakeholder forums have the opportunity to debate and shape the way the vision is developed. We will also be in touch to discuss our plans for Making Tax Digital in further detail. In the meantime, please do get in touch with the MTD team directly if you have any questions.
I look forward to working closely with you on next steps, and am very grateful for all the contributions so many organisations, businesses and agents have already made to support the modernisation of tax administration.”
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