The Treasury confirmed on 13th July that Making Tax Digital for business will go ahead, however it has announced a revised timetable.
It will become mandatory for businesses whose turnover is above the current VAT threshold (£85,000) to begin using the new tax system from 2019.
Mel Stride, Financial Secretary to the Treasury and Paymaster General 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. Three million of the smallest businesses and landlords will be able to move to the new digital system for keeping tax records at a pace that is right for them.”
The Treasury document outlines the new timetable:
- From 2019, only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
- All other businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
- Early adoption of Making Tax Digital will be available on a voluntary basis for businesses and landlords, and for other taxes
HMRC had expected Making Tax Digital to generate an additional £500m in tax revenues a year. 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.
A Treasury source stated: “the main concern is the pace of the change. We recognise that businesses need longer to adapt and so that is why we are saying that companies will not have to use quarterly reporting until at least 2020. VAT reporting under Making Tax Digital will be mandatory from 2019 but as companies already report VAT on a quarterly basis this will not be a major change.”
Software companies have welcomed the delay but there is some concern that the Government must not become complacent. Recent surveys of software clients show low levels of awareness of the plans for Making Tax Digital, highlighting the general lack of communications about the rollout of the system.
If you would like us to explain how these changes affect you and how you can prepare for Making Tax Digital, call us today on 0800 0523 555 or contact us online here to arrange a free initial consultation.