HMRC's Making Tax Digital Timeline

HMRC has plans to become one of the most digitally-advanced tax administrations in the world. This means that big changes are needed to our current tax system, affecting both how data is collected and how it is stored by HMRC.

HMRC has taken a major step forward in achieving this with the launch of the Making Tax Digital initiative. This, to use their words, will transform tax administration, so that it is:

July 2020 saw the treasury provide a written statement declaring HMRC's 10 year plan along with announcing the MTD deadlines identified below.

• More effective
• More efficient
• Easier for taxpayers to get their tax right

Timeline

HMRC’s MTD journey so far:

What's next for MTD

What's first?

For many businesses, the starting point for MTD is VAT. As of 1 April 2019, businesses registered for VAT because their turnover is over the threshold (currently £85,000) have to submit VAT Returns using the new MTD for VAT service.

As an agent, the starting point to help your clients with MTD for VAT will be the creation of an Agent Services Account.

As well as using the new MTD for VAT service, these businesses will also be required to keep digital records.

What's next?

HMRC have recently released an updated roadmap for Making Tax Digital, the highlights of which are:

• The soft landing period is ending from 1 April 2021, which allows businesses more time to ensure digital links are in place between software being used for VAT accounting purposes.
• In preparation for the mandatory migration of all registered VAT users into MTD for VAT in April 2022, HMRC is moving everyone away from the old XML submission route onto the MTD platform and is decommissioning the VAT XML submissions from 8 April 2021. This means third party software will not be able to submit non-MTD VAT returns but businesses will be able to submit the VAT Returns via their Business Tax Account.
• Self-employed businesses and landlords, with annual business or property income above £10,000, will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.

In addition, HMRC had already previously confirmed that they would extend the soft landing period to 1 April 2021, to allow businesses more time to ensure digital links are in place between software being used for VAT accounting purposes.

Future-proofing with TaxCalc

We are actively working on solutions, as recognised by HMRC, to make the transition into MTD for Income Tax as seamless as possible.

Initially we will be providing a method to submit periodic updates to HMRC and enhancing the range from there. We are also keen to develop transactional record keeping, in time, as a solution for the digital record keeping requirements to assist in the submission of quarterly updates to HMRC.

We're enthused by the changes that Making Tax Digital will bring to our software and we would love to hear from agents who'd like to be involved in future product development.

Making Tax Digital for Income Tax is currently in BETA development and HMRC have a pilot scheme running.

If you'd like to be involved in the pilot scheme or you would like to be involved in how we will be shaping our MTD solutions, please get in touch with us at mtd@taxcalc.com.

Our MTD journey together is an ongoing one. Please watch this space for further updates as they arise.