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The digital tax revolution is coming soon

15 August 2016

HMRC has issued not one but six consultation documents outlining its Making Tax Digital programme. Some commentators have suggested that the timescale for achieving this new digital landscape is “very challenging”.

At the same time, HMRC announced that some 1.3m small businesses would not have to update the revenue quarterly or keep their records digitally.

HMRC said that Making Tax Digital would make paying tax less burdensome, because it champions cash-based accounting, meaning businesses (and individuals) pay tax on cash received rather than invoices issued.

The six Making Tax Digital documents issued for consultation are:

1) Making Tax Digital: Brining Business Tax into the Digital Age - considers how digital record keeping and regular updates should operate, including exemptions.

2) Business Income Tax: Simplifying Tax for Unincorporated Businesses - seeks views on changing how the self-employed map accounting periods onto the tax year (basis period reform); extending cash basis accounting; reducing reporting requirements; and reducing the need to distinguish between capital and revenue for businesses using cash basis accounting.

3) Business Income Tax: Simplified Cash Basis for Unincorporated Property Businesses – This consultation considers the extension of cash basis accounting for landlords.

4) Making Tax Digital: Voluntary Pay As You Go - This consultation: looks at options for business customers covered by the requirement for digital record-keeping to make and manage their voluntary payments; considers how voluntary payments will be allocated across a customer’s different taxes; and explores the best way of dealing with the repayment of voluntary payments. It also broaches the opportunity regular updating provides to make earlier repayments of withheld taxes.

5) Making Tax Digital: Tax Administration - consultation covers aspects of the tax administration framework that need to change to support Making Tax Digital. It also sets out proposals to align aspects of the tax administration framework across taxes, including the simplification of late filing and late payment sanctions.

6) Making Tax Digital: Transforming the tax system through the better use of information - This consultation focuses on how HMRC will make better use of the information it currently receives from third parties to provide a more transparent service for customers that reduces end of year underpayments and overpayments. It also explores HMRC’s future ambition for the use of third party information from 2018 onwards, which will enable it to deliver the end of the tax return by 2020.

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