Following concerted pressure from business representatives the Government has finally relented and agreed that small businesses and landlords should not be forced into a rapid move towards digital tax reporting.
Commenting on the announcement, HM Treasury Minister Mel Stride 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.”
In summary the changes announced amount to:
- Only businesses with a turnover above the VAT threshold (currently £85,000) will need to keep digital records and only for VAT purposes
- They will only need to do so from April 2019
- Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least April 2020.
VAT has been online since 2010 and over 98% of VAT registered businesses already file electronic returns. Making Tax Digital (MTD) will build on this by integrating digital record-keeping to provide a single process, with the quarterly updates generated and sent direct from the software the business/agent uses to keep their records.
Those businesses with turnover above the VAT threshold will have the option to provide quarterly updates for other taxes but there will be no requirement to do so.
Similarly, businesses that are not VAT registered and those below the VAT threshold who have voluntarily registered for VAT can opt to join MTD.
That’s settled then. Until the next change of heart?
We expect this to be confirmed (hopefully) once and for all in the Finance Bill, due to be published after Parliament’s summer recess.
Fingers crossed businesses will actually be able to start to plan, without even more uncertainty about their future reporting procedures.