As part of the Bringing business tax into the digital age document, plans to abolish the current requirement on partners to report their individual profit share in an annual tax return are laid out.

‘HMRC considers that Making Tax Digital offers the opportunity to sweep away a whole tier of the current process’, it said in its consultation. Under the plans, through a nominated partner, partnerships will fulfil the obligations of Making Tax Digital, maintaining digital records and providing regular updates on behalf of all the partners. HMRC expects around 400,000 ‘ordinary’ partnerships will be affected.

The proposals would see the partnership’s updates would ‘feed directly into each partner’s digital tax account as prepopulated, estimated income’.

Each partner’s estimated income would be based on the profit allocation as reported to HMRC. As a result, each partner will not need software, maintain their own digital records or regularly update HMRC unless they have other business interests.

Limited liability partnerships (LLPs) and partnerships which have partners that are not individuals are not included in the plans to exempt unincorporated businesses with income below £10,000 as the proposal currently stands.

The move to online filing of tax information was first outlined in Budget 2015. The Making Tax Digital policy will see businesses to keep digital records of trading and transactions, providing HMRC with updates at least quarterly, with their tax position finalised at the end of the year. It is hoped the more frequent updates to HMRC will translate into an in-year estimate of the tax due.

The Making Tax Digital: Bringing business into the digital age consultation is here. 

The full collection of Making Tax Digital consultations is here and run until 7 November 2016.