In August of 2016, the government published six documents of consultation, taking into account each sector and element that could be affected with the implementation of Making Tax Digital. On the 31 st of January 2017, the responses and the changes on account of the feedback were published. Individuals and businesses had raised their major concerns about the digitalisation of the taxation system, and brought to light the perspective of the common people. Over 1,100 written responses were received by the HM Revenues and Customs. In addition to this, around 1200 online responses were received in the guide to consultations. In light of these responses, HMRC has agreed to make key changes in MTD, and promised to give consideration to some changes, such as exempting small businesses from the threshold of £10,000. The HMRC director of Business Customer and Strategy, Theresa Middleton, explained: “We have not included the exemption threshold and deferral threshold as the government has decided that it needs more time to consider these issues, but they will be confirmed before July 2017 when the legislation is laid.”
Despite the agreement to changes, and the concerns over the too-soon implementation of MTD, the government has decided to follow the deadline of April 2018 as the time to put into action the quarterly reporting system. The biggest changes in MTD published by the government in the six consultation documents are:
1. Bringing business tax into the digital age
The responses included concerns of data security, burden on small businesses and those who did not adapt to technology. Taking these concerns into account, the government has allowed the use of spreadsheets for the businesses to maintain their records. This is probably one of the biggest changes, as businesses had been worried about the record-keeping process. The government also hints at the use of spreadsheet software in the future.
The particular concern of having to store digital records along with the physical records was clarified, and HMRC has clarified that businesses would not be required to store these records.
Charities are now exempted from keeping digital records, but their trading subsidiaries are still eligible for keeping and updating digital records.
2. Simplifying tax for unincorporated businesses
The threshold of the cash basis has been increased to £150,000, and the rules on the revenue and capital expenditure have been simplified in order to make it easier for businesses to determine if their expenses are tax deductible.
3. Cash Basis for unincorporated property businesses
For each real estate business, the landlords now have an income threshold of £150,000.
4. Tax administration
The government has agreed that some relaxation should be given in the transition process of the implementation of MTD, and the taxpayers will now be provided twelve months before they will be liable for late submission penalties.
5. Voluntary pay as you go
The public’s concerns included the need of accessible and speedy voluntary payments that could be made to their individual digital accounts. In addition to this, the early repayments will now be considered only after MTD has been fully implemented.
6. Transforming the tax system through the better use of information
The government has decided that they would start using the Pay As You Earn (PAYE) data from this year onwards, to assess if the right taxes are being paid or not. For the time being, the taxpayers will receive letters that remind them to check their digital tax account, but in the long term, they will be pinged digitally.
Although there are some concerns, which are still left unaddressed, such as creating a process to address queries, the HMRC has promised to test the system thoroughly to ensure that it is user friendly.