Businesses breathing a sigh of relief after controversial tax plans for quarterly reporting were put on hold, are being advised to avoid celebrating too soon.
Under the Government’s Making Tax Digital (MTD) initiative, millions of businesses and self-employed people would have had to file quarterly tax returns to HM Revenue & Customs (HMRC).
The scheme was due to hit large businesses from 2018 and small businesses from 2019.
However, on the eve of a debate in Parliament, the Government announced it was dropping several measures from the Finance Bill including MTD.
The Bill was the last one debated in the House of Commons before Parliament adjourned for the General Election.
Lisa Macpherson, head of tax technical at Truro chartered accountant and business adviser, PKF Francis Clark, said the decision would be welcomed by many businesses.
But, she warned: “Any celebrations could be premature as it’s unlikely we’ve seen the back of MTD.
“Will it survive? The simple truth is we don’t know, although we think it likely that it will.
“Introducing MTD from April 2018 was already a challenging timetable and the June election makes it harder for the Government and HMRC to achieve a 2018 start date for mandatory tax filing.
“However, this is a key Government policy and it is possible that we will see it resurrected in a new Finance Bill immediately following the election.”
PKF Francis Clark had called on the Government to heed calls for a delay in bringing in the changes.
The firm argued that a delay of one year would provide much needed time to implement a full scale test with many more participants.
Another option was to make this voluntary for the first year or two, in order to give hard pressed businesses time to adapt to the sweeping changes.
Macpherson said: “One thing that won’t change, however, is the push to get businesses online.
“The future for record keeping is definitely digital and many small businesses could see great advantages from moving to cloud based accounting systems, including the ability to track costs in virtually real time, and to monitor profitability and adapt their strategies accordingly.”
At present small businesses and the self-employed are obliged to file tax returns online or by post once a year.
Worst-hit by the change to MTD would have been the self-employed with turnovers of more than £85k who faced filing at least five returns a year from April 2018 in addition to the regular VAT return.