Yesterday the Government announced they have listened to consultations from business and accountants and are delaying Making Tax Digital (MTD) by at least 12 months.
Originally the plan from the government and HMRC would have forced the smallest businesses and sole traders to start quarterly reporting from April 2017, but those below the VAT threshold (currently £85,000) will now be exempt from requirements to quarterly report until the government can reassess the plans.
There will also be a one-year delay for the wider implementation, with an April 2019 start date for businesses with a turnover above the VAT threshold (currently £85,000) to start keeping digital records but only for VAT purposes.
Full-blown quarterly reporting will not start before ‘at least 2020’ according to the ministerial statement.
Changes at the Treasury after the election seem to have resulted in a more sensible approach to the whole Making Tax Digital debacle.
The new minister in charge of Making Tax Digital, Mel Stride, financial secretary to the Treasury 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.
This will leave HMRC with a hole to fill as it had expected Making Tax Digital to generate an additional £500m in tax revenues a year.
In terms of quarterly reporting for incorporated businesses and large partnerships, ‘larger businesses will have to use Making Tax Digital for VAT only, regardless of the type of business, but not before at least 2020. Larger businesses will not have use Making Tax Digital for corporation tax reporting before at least 2020, although it is still not wholly clear whether they will ever have to enter the system due to the complexity of their tax compliance requirements.
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. Businesses and landlords with a turnover below the VAT threshold will be able to opt to use the new digital reporting system but it will not be mandatory until ‘at least’ 2020.
The Treasury document states that under the new timetable:
- only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes;
- they will only need to do so from 2019; and
- businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
Burgis & Bullock are running a series of MTD briefings (which will re-start following the Summer Holiday period, in September) and workshops on the benefits of digital record keeping and cloud accounting. For more information or to book on one of the sessions contact your local Burgis & Bullock office, call 0845 177 5500 or use our on-line contact page.