Making Tax Digital: HMRC to soft launch beta testing with April pilot

HMRC plans to start testing the Making Tax Digital reporting system from April with an initial cohort of 100 or so testers in place for the pilot, with ambitious plans to expand the number of testers to the thousands by the autumn, reports Sara White

It has set ambitious targets to sign up around 400,000 taxpayers from sole traders, landlords and the self employed to trial the quarterly reporting system by October 2017.

This means that there is a tight timeframe for testing the processes and ironing out any technical and usability issues.

There has been widespread criticism of the rush to implement Making Tax Digital, which although in principle is supported by the tax profession, the rollout plan leaves little time for individual taxpayers, accountants and tax advisers, to get to grips with the new reporting requirements before they become mandatory from 6 April 2018.

The first tranche of taxpayers to be forced to report under Making Tax Digital will be sole traders, unincorporated businesses, the self employed and buy-to-let landlords.

HMRC has confirmed that it plans to allow taxpayers to upload data using spreadsheets although these will have to go through a third party software tool to ensure that the data can be processed into the new software at the tax authority.

Officials from the tax office are in discussion with software developers about the next steps for Making Tax Digital with the expectation that at least three commercial providers will sign up to provide free entry-level software to enable Making Tax Digital reporting.

A major communications programme about the upcoming changes will not start immediately as there are still a number of issues to be resolved, such as naming commercial providers of free software, developing these free software tools and most importantly setting the minimum threshold for Making Tax Digital reporting.

The initial proposals set a £10,000 limit on earnings, but this has not been finalised as yet. The scale of objection to this low level threshold, expressed from many stakeholders and taxpayers in the responses to the consultation means that the government is now reviewing this before finalising specific details.

Many of the professional institutes, including CIOT, ICAEW and ACCA, are calling for a £83,000 threshold in line with the current VAT threshold.

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