Making Tax Digital Delayed
Background
It has been well publicised that the government and HM Revenue & Customs have been planning to introduce the quarterly reporting of accounting information for small businesses and sole traders from April 2018. Following widespread opposition from MPs, in particular the influential Treasury Committee, businesses and professional bodies regarding the pace of change the roll out of ‘Making Tax Digital’ (“MTD”) has now been delayed until 2020.
It was announced last week by the government that those businesses and sole traders below the VAT threshold (currently £85,000) will now be exempt from the requirements to report quarterly until at least 2020.
Detail
MTD is aimed at streamlining the system for keeping tax records, by requiring them to be kept digitally, and providing those records to HMRC. By introducing a delay in implementing MTD the government has acknowledged the need to ensure businesses have plenty of time to adapt to the changes to ensure a smooth transition to a digital tax system.
Mel Stride, Financial Secretary to the Treasury and Paymaster General said “Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms. We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”
Under the new timetable:
- Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records;
- But only for VAT purposes;
- And only from April 2019.
VAT already requires quarterly returns, and therefore businesses will not be required to provide information to HMRC any more regularly during the initial phase then they currently do.
For other taxes, businesses will not be required to keep digital records, or update HMRC quarterly, until at least 2020. However, MTD will be available on a voluntary basis for the smallest businesses, and for other taxes. This means that businesses and landlords below the VAT threshold will have the option of choosing when to move to the new digital system when it suits them or waiting until it becomes mandatory, although this will not be for at least another two years.
The delay in MTD is likely to come as a relief to many, and it provides HMRC with more time to pilot quarterly reporting, as well as giving businesses, professionals and the software providers more time to prepare for moving to digital record keeping.
If you have any questions on the above or require more information please contact our Tax Director, Jenny Marks.
To see our other news items please visit our Muras Baker Jones – Blog.