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HMRC’s vision of the future

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A new government report Building a trusted, modern tax administration system sets out HMRC’s ten-year strategy ‘for the future of tax administration in the United Kingdom, designed to improve its resilience, effectiveness and support for taxpayers’.

Part 2 of the report sets out the government’s vision for the future of MTD – extended to other taxes and brought together in a single digital account for all taxpayers.

Paragraph 5.3 sets out next steps for MTD:

  •        from April 2022, MTD will apply to all VAT-registered business for their VAT obligations;
  •        from April 2023, businesses and landlords with business income over £10,000 per annum which are liable for income tax will need to keep digital records and use software to update HMRC quarterly through MTD; and
  •        to ensure that the MTD approach also evolves for those businesses that have incorporated, the government will consult later in 2020 on the design of what the system should look like for corporation tax.

While the government’s commitment to building a digital tax administration has been broadly welcomed, the timing of the announcement, as businesses continue to work through the knock-on effects of coronavirus, has raised concern, as Jamie Ratcliffe, head of indirect tax for EY in the UK, points out: ‘The question that will be on many business owners’ lips today is that of the timing of the announcement. Businesses are facing significant challenges on many fronts, brought about by COVID-19, Brexit and wider economic uncertainty. For many of our clients there is an urgent need to focus on cash savings, and further disruptions and distractions will result in a great deal of time, effort and resources being spent by businesses that isn’t income generative.’

The ten-year plan will cover a number of key areas:

  • for policy, a progressive extension of HMRC’s MTD work;
  • for systems, exploring appropriate timing and frequency for the payment of different taxes, and the necessary supporting technology infrastructure; and
  • for law and practice, a reform of the tax administration framework itself.

HMRC intends to bring forward any changes ‘incrementally and consultatively’, working with taxpayers, agents and software providers to take forward its vision of the future, committing also to work closely with representative bodies.

Commenting on the policy announcement, Chris Sanger, EY’s UK head of tax policy, noted that the government had ‘set out a vision that sought to embed HMRC into the fabric of business, building on the MTD programme but extending far further. This, if delivered, will result in HMRC having far greater visibility of activity undertaken in the UK in nearer to real time, something seen in other countries.’

HMRC’s various guidance notes on MTD have been updated to reflect the announcements, including the Making tax digital for business: stakeholder communications pack which provides a general overview.

Issue: 1497
Categories: News