Government pulls back on Making Tax Digital, giving small businesses more time

Government pulls back on Making Tax Digital, giving small businesses more time”

As part of the changes, only businesses with a turnover above the VAT threshold will "have to keep digital records, and only for VAT purposes" from 2019, and businesses will not be asked to keep digital records for other taxes until "at least 2020".

But that doesn't mean that 'at least' quarterly tax reporting online is wrong in principle, according to RSM tax consultant Andrew Hubbard.

In a statement yesterday, the Treasury said that changes to tax legislation which were dropped from the bill in April will still go ahead.

"We now look forward to working closely with HM Treasury and HMRC on creating a world-class digital tax system that businesses of all sizes will want to use".

The original timeline for "making tax digital" and the introduction of digital tax accounts foresaw that by 2020, HMRC would have moved to a fully digital tax system.

"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". However, the deferral will give more time for testing the system and HMRC will start the pilot for Making Tax Digital for VAT by the end of 2017.

Similarly, businesses that are not VAT registered and those below the VAT threshold who have voluntarily registered for VAT can opt to join Making Tax Digital for Business (MTDfB). As they already provide quarterly returns for Value-Added Tax purposes, they should find compliance comparatively easy.

As to the Treasury's line about choosing it, it likely means that traders will not be invited to jump to MTD and adopt quarterly tax reporting for other taxes until at least mid-2020.

HMRC will start to pilot Making Tax Digital for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in spring 2018. HMRChas already begun piloting the MTD services and will continue to do so, testing the system extensively with businesses.

MTD will be available on a voluntary basis for the smallest businesses, and for other taxes.

John Preston, CIOT president, said: 'Whilst we are supportive of the government's long-term ambitions for digitalising the tax system, we have always called for this to be achieved in a measured and manageable way. "However, many have been anxious about the scope and pace of reforms". It will also ensure that many more software products can be developed and tested before mandation is reconsidered'.

The government also addressed the hotly anticipated Summer Finance Bill, confirming it will be introduced following the summer recess, which concludes on 5 September. It will legislate for all the policies that were included in the pre-election Finance Bill.

The government has also re-confirmed that all policies originally announced to start from April 2017 will be effective from that date.

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