After months of uncertainty as to whether the initial plans and timetable announced in the Spring Budget for Making Tax Digital (MTD) would be implemented the Government announced on 13 July 2017 that it has listened to the many representations from the professional bodies, the Treasury select committee and agents and has set out a new MTD timetable.
Brian Harvey, partner at accountancy firm PKF Francis Clark said: “From a practical perspective there is a state of relief that eventually HMRC has seen sense. The changes announced give businesses and the accountancy profession alike a workable time frame for implementation as well as making what appear to be some sensible concessions which will benefit smaller businesses many of which exist in Cornwall.”
The proposed changes will now mean that:
- 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
- Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
- MTD will be available on a voluntary basis for the smallest businesses, and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system and 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.
Steve Maggs, tax partner at Robinson Reed Layton, an independent firm of chartered accountants and chartered tax advisers based in Cornwall, was delighted with the news:
“I had previously felt that HMRC were proposing an unrealistic timeframe for the introduction of Making Tax Digital, rushing into the plans out of ideological desire rather than practical consideration, so I am pleased to see that the government is listening and that plans will be delayed.
“Making Tax Digital represents one of the most significant changes the taxation system has ever undergone. There are huge implications for SMEs, the self-employed and landlords, so Cornwall will be particularly affected. It is imperative that businesses begin to prepare for the changes now, even with the announced delays.”
Accountants Bishop Fleming also welcomed the brakes being put on Making Tax Digital for business, after the government admitted it needed more time. Andrew Browne, head of tax at Bishop Fleming remarked:
“With the government taking its foot off the digital tax accelerator, businesses will no longer be frog marched into quarterly returns for the foreseeable future, allowing more time for lessons to be learnt from an ongoing pilot scheme. The smallest businesses and landlords will be much relieved that they will not have to file tax returns four times a year.”