Year-end & cash flow

HMRC launches Making Tax Digital pilot in preparation for full roll-out

HMRC has begun to distribute invitations for amaking Tax Digital pilot, giving a small number of business ownersthe chance to road-test the incomingdigital tax system.

Due for a full introduction in April 2018, the switch to digital self-assessment tax returns will require accounts to be submitted four times a year.

In January, the tax office announced plans for a year-long? Making Tax Digital pilot for hundreds of thousands? of tax payers, and arecent post on the Tax Agents blog confirmed the Making Tax Digital pilot would ‘start with small numbers but aim to have hundreds of thousands of small businesses and their agents taking part.

The Treasury select committee, which has been scrutinising the digital economy bill that comprises the switch to digital tax returns, has previously raised concerns over a pilot of the scheme. It warned itwould not give a realistic reflection of how Making Tax Digital will affect the most vulnerable businesses, as such owners would be likely to decline the invitation.

HMRC has advised those yet to receive an invite to begin recording income and expenditure information digitally, either on spreadsheets or accounting software, to prepare for a smooth transition next April.

The costs of switching to digital tax returns for small business owners and the self-employed has been a great issue of contention since the government confirmed its plans. HMRC’s own predicted costs differ greatly with calculations put forward by the Federation of Small Businesses (FSB).

The FSB suggested quarterly tax reporting on unfamiliar software would inflict annual costs of 2, 770 on the average small business owner. The tax office has insisted that costs would only reach 280 per year.

The rectify the conflict, the Treasury select committee recently ordered an independent review of costs by the Administrative Burdens Advisory Board (ABAB).

Andrew Tyrie, the MP leading the committee, recently said that a comprehensive pilot? of Making Tax Digital was necessary to gain an understanding of the real impact on small businesses.

FSB chairman Mike Cherry agreed that a full-scale pilotwas necessary.

comprehensive testing of the programme is critical to minimising the disruption it will cause to small firms at a time when the costs of doing business are at their highest since the beginning of 2014, he said in a statement.