HMRC to beta test Making Tax Digital system in April

HM Revenue and Customs (HMRC) has confirmed plans to beta test its Making Tax Digital (MTD) reporting system in April, with up to 100 testers due to be selected for an initial pilot ahead of a more significant trial in the autumn.

HMRC hopes to sign up as many as 400,000 UK taxpayers – from landlords and the self-employed community through to sole traders – to pilot its quarterly tax reporting system by October.

With such a tight deadline this autumn, it means there is a very small window for processes and UX issues to be ironed out following pilot tests.

The tax authority’s desire to quickly implement MTD means it is very important that individual taxpayers and unincorporated business owners and buy-to-let landlords get up to speed with the suggested reporting requirements before they become mandatory from April 2018.

HMRC has revealed it will allow taxpayers to upload tax reporting data via spreadsheets. However, these will be required to be submitted through a third-party software tool to guarantee that the data can be processed into HMRC’s new system.

HMRC is already in negotiation with a number of software developers regarding the next steps for MTD. It is anticipated that at least three commercial software providers will agree to offer free entry-level software to ease the transition of MTD reporting.

The elephant in the room for many small businesses and self-employed professionals is HMRC’s minimum threshold for MTD reporting. The tax authority’s initial proposals were set at £10,000 a year, but this has not been officially confirmed as yet.

Previous MTD consultations among stakeholders and taxpayers have been somewhat scathing of the low-level threshold. The Chartered Insitute of Taxation (CIoT), Institute of Chartered Accountants in England and Wales (ICAEW) and the Association of Chartered Certified Accountants (ACCA) believe the threshold should be raised significantly to £83,000, in line with the current UK VAT threshold.

Date published 6 Feb 2017 | Last updated 6 Feb 2017