Anything that helps businesses manage their tax more easily so they can focus on what they do best – innovate, expand and create jobs and profit – is positive.
In a world where customers and suppliers are already banking, paying bills and shopping online, it makes sense for HMRC and businesses to bring tax affairs fully into the 21st century.
Digitisation has already brought huge benefits to construction firms, transforming operations and services in everything from design and modelling to procurement and geographic information systems. So why should their tax be any different?
Making Tax Digital is part of HMRC’s plans to make Britain one of the most digitally advanced tax administrations in the world. Importantly, these changes deliver what businesses and individuals have told us they need.
Integrated tax system
Business has told us they want tax to be more integrated into the way they run their business, rather than something done separately months later. They want certainty over their tax bill, not having to wait until the end of the year – often longer – to find out how much they owe. We have listened and created a system that addresses all these modern business needs.
Accounting software, including smartphone apps, will create this integration. Businesses and individuals will have 24/7 access to their digital accounts, as well as a complete view of their tax liabilities and entitlements, allowing them to send HMRC information and payments simply.
“We’ll make it easier for businesses to get their tax right first time – the hurdle of the annual tax return will be a thing of the past”
They can see what each update means for their tax position throughout the year and how much tax they owe, helping them make decisions about budgeting, investing and growing. Unnecessary delays will be eliminated as the tax system will be operating in close to real time, removing the risk of missed deadlines, penalties and errors being carried forward from one year to another.
Beyond helping businesses get their tax right, Making Tax Digital will help them improve and develop, with targeted alerts and guidance making them aware of entitlements and reliefs as well as wider government support for businesses.
Annual tax returns binned
In the future, businesses will be keeping track of their tax affairs digitally, updating HMRC at least quarterly via their digital account. But this will not mean having to fill in a full tax return quarterly.
Instead, updates will be generated from digital records and in most cases little or no further information will be needed. This will make it easier for businesses to get their tax right first time and keep on top of their affairs – the hurdle of the annual tax return will be a thing of the past.
The Making Tax Digital for VAT pilot is now open for business – a major milestone in this transition. Construction businesses whose affairs are already up to date and straightforward can join up to use the new tools to submit their VAT returns digitally. Over the next few months, businesses will receive a letter from HMRC explaining how to subscribing to Making Tax Digital for VAT.
Making Tax Digital is part of the government’s commitment to boosting the growth of the economy. Bringing our tax system into the digital age is right for modern business, right for modern government, right for modern Britain.
Mel Stride is the financial secretary to the Treasury