HMRC pushes ahead with digital tax plans but with some concessions

HMRC pushes ahead with digital tax plans but with some concessions
Enterprise Nation
Enterprise NationEnterprise Nation

Posted: Tue 31st Jan 2017

The government has published its response to the more than 3,000 submissions to the consultation over its controversial plans to digitise Britain's tax system requiring businesses to submit tax information electronically on a quarterly basis.

Releasing draft legislation for the so-called 'Making Tax Digital' initiative, HM Revenue & Customs (HMRC) said business owners will still be required to send details every three months but will be now able to continue to use spreadsheets to record receipts and expenditure, which they can then link to software to automatically send updates to HMRC.

Some organisations had expressed concern that the changes would impose a new burden on entrepreneurs in terms of time and technology.

Businesses will have access to free software, HMRC continued, adding that there will be a 12 months grace period before any late submission penalties will be applied. A consultation on the exact system of fines will start in the spring following feedback from respondents.

Ministers have previously stated that self-employed businesses and landlords with a turnover under £10,000 a year will not have to keep their records digitally or make quarterly updates, but some commentators suggested the threshold should be higher.

As a result, HMRC said today: "the government will need to consider further issues, such as the initial exemption threshold and deferring the changes for some small businesses alongside their cost, with final decisions to be made before legislation is introduced later this year".

HMRC also confirmed that free software will be available to the "majority of the smallest businesses" and businesses that cannot go digital will not be required to do so. It is not yet clear how companies prove they can't go digital.

The plans to require most businesses, self-employed people and landlords to update HMRC quarterly are set to be introduced by 2020. The government claims the changes will help businesses avoid errors and save the taxpayer £8bn a year.

Enterprise Nation
Enterprise NationEnterprise Nation
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