Small Businesses: Taxation
The question
To ask the Chancellor of the Exchequer, what assessment HMRC has made of the potential impact of quarterly reporting on smaller businesses.
Answered by James Murray
Quarterly updates required under Making Tax Digital (MTD) for Income Tax are not the same as full tax returns. They are simple summaries of income and expenses. Software will automatically draw data from a taxpayer’s digital records so where these records are up to date, updates will be quick and easy to submit.
Quarterly updates help to reduce the risk of error by moving record-keeping closer to real time. With this data already captured in software, preparing the end-of-year return should also be easier, as the information needed is already available. Quarterly updates can also provide estimates of tax liability and nudging and prompts to support users to get their tax right.
HMRC has an established model for estimating the impacts that result from MTD. The latest published assessment is available at:
MTD for VAT is already helping businesses to increase their productivity, with most users surveyed reporting benefits including time savings and greater accuracy.
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