HM Revenue and Customs (HMRC) has launched its year-long pilot of the controversial Making Tax Digital (MTD) programme, in which businesses will be required to change the way that they report their taxes.
The pilots, which were first announced in January, will be on an invite-only basis. The organisation said in a statement this week that it "will invite some customers, both businesses and their agents, to sign up for a new way to report income and expenses online".
HMRC added that at different stages of the pilot, customers will help it to develop and improve the new service by: using accounting software to record their business income and expenses; sending summary reports of their income and expenses direct from their digital records quarterly or more often, if they choose; and, signing-up to go paperless.
Based on the information they report, customers will get an estimated tax calculation.
After the first group of businesses and agents have tested the new service, other customers will be able to join the pilot, enabling them to report their income and expenses for the quarter they join, as well as any previous quarters.
Customers who aren't invited to take part in the pilot won't be able to start sending quarterly reports to HMRC immediately, the organisation said, but it urged them to start using accounting software to keep their records, if they don't already, and to ensure that the software is compatible with quarterly reporting.
It said that it will publish a list of software suppliers who've developed compatible software and registered with them later in the year. HMRC has promised that some of this software will be free.
The aim of the project is to reduce errors in tax returns, which HMRC estimates costs it £8bn a year. However, the government has come under scrutiny for pressuring companies to make big changes quickly, while the costs of the changes have also been debated extensively.
The Federation of Small Businesses (FSB) suggested that the programme could cost each business £2,770 a year, which is significantly more than the government's estimate of a 'one-off' transitional cost of £280 per business. The government believes that it will save businesses in the long-run.
Last month, the chairman of the Treasury Committee, Andrew Tyrie, asked both the FSB and the financial secretary to the Treasury for a detailed overview of their estimates, including their methodologies.
He will incorporate their feedback when he gives evidence to the committee later this month.
Computing's IT Leaders Forum 2017 is coming on 24 May 2017.
The theme this year is "Going Digital: Why your most difficult customer is your best friend".
Attendence is free, but strictly limited to IT Leaders. To find out more and to apply for your place, check out the IT Leaders Forum website.
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