Making Tax Digital

Digitising tax compliance

HMRC is formulating a ten-year plan to modernise the whole of the UK’s tax administration system by 2030 which will facilitate more digital reporting in ‘real time’, i.e. closer to the time of transactions. To achieve this HMRC will have to restructure its own internal systems and parliament will need to rewrite large parts of the tax law.

For example, the structure of penalties which are imposed for non-compliance will need to be revised and this may happen alongside a change in the timing of tax payments.

Making Tax Digital (MTD) is part of this long-term modernisation project. The ultimate goal is for all regular transmissions of data between taxpayers and HMRC to be performed digitally, and where possible automatically.

MTD for business is being introduced tax by tax, not by business size or type. Although separate reports will have to be submitted for each tax in the short term, the submission process could be streamlined in the future once tax law is aligned for all business taxes.