UK postpones plans on Tax technology
Former Chancellor of the Exchequer, George Osborne, announced last year the “death of the tax return”.
28 July, 2017
The plan was named ´Making Tax Digital´ and it was aimed at automating all tax reporting in the UK by 2020. This would require all transactions to be recorded and reported digitally from the taxpayer ERP system. Regarding VAT, the deadline is 1 April 2019.
This month the UK tax authorities published a new timeline for the Tax technology plan. Under the new deadlines, businesses with a turnover below the VAT registration threshold (currently GBP 85,0000) will not be required to keep records electronically. Those companies with a turnover above this threshold will need to move to digital accounting from 2020 for direct taxes. Regarding VAT, the initial plan remains unchanged: All transaction data must be reported quarterly by electronic means as from 1 April 2019.
Reporting information at transaction level is an increasing trend in the European Union. The rationale behind this initiative lies with the technology now available for businesses to produce this level of detail and for tax authorities to process and review this information automatically. Once these changes are introduced in the UK, HMRC will be able to cross-check your supplies with purchases reported by your client, highlighting any gaps and reacting quicker to potential fraud. In principle, this system also reduces the administrative burden on taxpayers, although this is not confirmed in practice.