In a bid to calm fears about the introduction of Making Tax Digital (MTD), HM Revenue & Customs (HMRC) is to invite selected businesses and agents to take part in a pilot programme to report their income and expenses as part of the MTD strategy.
A report from the Treasury Committee in response to the proposed introduction of MTD called for more detailed testing of the implementation of digital tax services, citing what it called “insufficient engagement” with businesses that will have to rely on them.
HMRC will therefore seek user feedback to try and inform development of the new functions, such as in using accounting software to record the business’s income and expenses. They will also ask the participating firms to provide summary reports of income and expenses on a quarterly or more frequent basis, as well as switching to paperless working, with HMRC providing an estimated tax calculation.
According to a statement by HMRC, once the new services have been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join, as well as any previous quarters.
Although customers that are not invited to participate in the pilots will be unable to send quarterly reports to HMRC initially, options are available to start making use of accounting software to maintain their records.
Earlier this year, HMRC committed to piloting new digital systems designed to overhaul tax reporting for hundreds of thousands of businesses and providing free software to smaller companies in response to an eight-month consultation on its plans.
There will also be a number of additional commitments for businesses under MTD, including more extensive reviews, before introducing a mandatory requirement for businesses to switch to electronic record management.