Making Tax Digital

HMRC aim to be one of the most digitally advanced tax administrations in the world by making tax digital. They have published a report and discussion paper setting out how new procedures for interacting with HMRC and paying tax will be implemented under the Making Tax Digital banner.

It is intended that by 2017, every individual and small business will have access to their own secure digital tax account. This enables them to interact with HMRC digitally. By 2020, businesses and individual taxpayers will be able to register, file, pay and update their information at any time. For the vast majority, there will be no need to fill in an annual tax return.

The government is also to consult on the issue of payment. Including options to simplify the payment of taxes and align payment arrangements. Also, to bring payment dates closer to the time of the activity or transactions generating the tax liability. HMRC have held a series of consultation events in 2016 to discuss these issues with stakeholders. They are now testing new making tax digital systems and procedures on real tax payers.

The Making Tax Digital project has also presented the opportunity to align payment arrangements across different taxes and to provide a more joined-up service for taxpayers. The government has already brought the collection of Class 2 National Insurance Contributions (NICs) for the self-employed into the arrangements for self-assessment. This meant that from April 2015, Class 2 NICs are collected alongside Class 4 NICs. The government is also consulting on the abolition of Class 2 NICs and reform of Class 4 to further simplify the system.

HMRC have now officially launched Personal Tax Accounts (PTAs). This enables UK taxpayers to manage their tax affairs online. More than a million customers completing their self-assessment electronically will be directed to their online PTA which will:

provide a clear and joined-up view of the tax they pay and benefits they are entitled to;
enable customers to update their tax details as they occur in real time. Removing the need to resubmit information; and
make it easier and more efficient to contact HMRC officials through services like web chat and virtual assistant.

Between now and May 2016 HMRC will continue to add new services to the PTA, including:

improvements to the ‘Check your tax estimate service’. So customers can look a year ahead and back on their current, future and previous tax position;
a new online payment and repayment service;
expanding the opportunity for non-self-assessment customers to choose to stop receiving paper from HMRC;
integration of the tax credits online service in time for 2017 renewals;
introducing change of circumstances for the marriage allowance service; and
introduction of the new national insurance/state pension service.

Further information on the Making Tax Digital project can be found at www.gov.uk/government/publications/making-tax-digital.

At CloudBook Accountants, we specialise in online accounting software which will be necessary to comply with making tax digital. All of our accounts packages already include a quarterly review. So our clients are ready to update HMRC with quarterly reporting as will be required under making tax digital.