HMRC Digital Tax Accounts

HMRC digital tax accounts

From 2016 HMRC has started implementation of its ‘Making Tax Digital’ initiative.  HMRC’s objective is to have moved to a fully digital tax system by 2020 where users can interact with HMRC in real time, and ultimately an end to the tax return.  HMRC see this as a way of reducing red tape for businesses, removing the burden of providing information to HMRC that it already knows and allowing taxpayers to keep up to date with HMRC liabilities.  Cynics on the other hand might view the move as a way for HMRC to get paid sooner and make further cuts to its already creaking customer service department.

For businesses the changes might not be immediately obvious, as 98% of corporation tax returns and 99% of VAT returns are already submitted online.  However as part of the ‘Making Tax Digital’ transition by 2020 most businesses will be required to update HMRC at least quarterly via their digital tax account, with some businesses being phased in from as early as April 2018.  This suggestion had sparked fears that HMRC will force businesses to submit quarterly tax returns, resulting in increased administrative burden.  A petition to scrap plans for quarterly tax returns was signed by over 114,000 people and following a parliamentary debate the Government responded that “Making Tax Digital will not mean ‘four tax returns a year’.  Quarterly updates will largely be a matter of checking data generated from record keeping software or apps.”

So as it stands we know that quarterly submissions are coming from 2018 onwards, but we don’t yet know the content of the submissions.  We’re monitoring the position closely to ensure that clients are aware of the latest changes as soon as they occur.