Digital Destiny

Digital destiny

The Government has a long-term goal to digitise the tax system - a project which it refers to as 'Making Tax Digital' (MTD). Many types of tax returns are regularly filed online, and some returns (such as for VAT) have no paper versions. However, for most returns there is a step in the process when a human types figures into an online form.

Under MTD the aim is to eliminate the human-typing step, so the figures which are reported to HMRC can't be mis-typed or missed altogether.

HMRC believes that, by allowing a computer programme to gather up all the tax-related data and transmit them directly to HMRC's computer via MTD­ enabled software, the errors introduced by humans will be eliminated.

The MTD programme is being introduced tax by tax, and VAT is the first area where manual typing of the return is to be replaced by accounting software. For those with taxable turnover above the VAT registration threshold, VAT returns prepared for periods beginning on and after 1 April 2019 will usually have to be submitted using MTD-enabled software. Some complex businesses have their start date for MTD for VAT deferred until periods beginning on and after 1 October 2019.

HMRC is encouraging all businesses and individuals to interact with it as much as possible online, instead of by phone or paper. Most of the information you need about your personal tax affairs can be found in your online personal tax account. Businesses also each have an online business tax account, which will be a vital part of the MTD process.

Once digital processes are embedded into tax compliance, HMRC  will change the filing dates for tax returns so they get the information, and possibly the tax payments, more quickly. For example, the filing and payment deadline for Stamp Duty Land Tax, which purchasers pay when buying property in England or Northern Ireland, will be cut from 30 days to 14 days after the completion date, with effect from 1 March 2019.

However, digitisation is not the only thing you need to consider. The tax reliefs available for specific categories of expenditure have to be claimed within a tight window, such as for the costs of research and development, or for investing in the shares of certain small companies.

We recommend you undertake an annual review of your financial affairs to check if you are paying more tax than you need to, and whether the structures you set up in the past are still appropriate.

Under self assessment, your personal return for 2017/18 must be submitted, and the tax liability settled, by 31 January 2019. Between then and the end of the tax year (5 April 2019) is a good time to assess whether you are as well defended against high tax charges as you can be.

Of course, the personal circumstances of each individual must be taken into account in deciding whether any particular plan is suitable or advantageous -  but these suggestions may give you some ideas. We are happy to discuss them with you in more detail.