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HMRC launches digital tax pilots for businesses

Neil Merrett Published 05 April 2017

Select companies and agents will from this month be asked to help trial new digital services on the back of recent Treasury Committee concerns about the department’s approach


HM Revenue and Customs (HMRC) has announced it will this month be inviting businesses and agents to take part in a pilot programme to report their income and expenses as part of its the Making Tax Digital for Business (MTDfB) strategy.

The department has announced that user feedback would be sought to try and inform development of the new functions, such as in using accounting software to record income and expenses from a business.  Companies are also being asked to provide summary reports of income and expenses on a quarterly or more frequent basis, as well as switching to paperless working, with an estimated tax calculation being provided by HMRC.

“As soon as the new service has been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join as well as any previous quarters,” said HMRC in a statement.

Although customers that are not invited to participate in the pilots will be unable to send quarterly reports to HMRC initially, options are available to start making use of accounting software to maintain their records.  The department added that suppliers or agents may need to be asked if software in use for a business will be compatible with quarterly reporting, with a list set to be published later this year of compatible and in some cases free-to-use alternatives.

Earlier this year, HMRC committed to piloting new digital systems designed to overhaul tax reporting for hundreds of thousands of businesses and providing free software to smaller companies in response to an eight month consultation on its plans.

As part of its broader Making Tax Digital (MTD) strategy, the department has set out a number of additional commitments, including more extensive reviews, before introducing a mandatory requirement for businesses to switch to electronic record management.

The commitments followed calls from Parliament’s Treasury Committee for more detailed testing of the proposed digital tax systems, while backing a prolonged rollout of all new technology beyond the current 2020 target to ensure industry and business owners are not adversely affected.

A report from the committee backed changing the existing government approach to implementing digital tax services citing what it called “insufficient engagement” with UK businesses that will have to rely on the digital systems to ensure potential concerns are being addressed.

“At present, many of those on whom demands from MTD will be made – millions of small businesses up and down the country: the backbone of the economy - are ill equipped to handle the reporting requirements,” noted the findings at the time.

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