Making Tax Digital has been shrouded in uncertainty since its inception. The goal posts have already been moved a few times, but this latest announcement has potential moved the whole pitch!
HMRC’s original plan would have made Small entities and sole traders to start quarterly reporting from April 2017, but those below the VAT threshold (currently £85,000) will now be exempt from requirements to quarterly report until the government can review future plans.
In recent months a number of high powered accountancy bodies have asked for clarity and more time for these “overhauled measures” to be phased in, and that is exactly what has happened.
There will also be a one-year delay for the wider rollout, with an April 2019 start date for businesses with a turnover above the VAT threshold to start keeping digital records. This however is not for quarterly financial reporting, but only for VAT purposes.
It has been said that Quarterly Reporting as standard will not happen until “at least” 2020.
Mel Stride, financial secretary to the Treasury, and head of MTD infrastructure 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.’
HMRC has announced it will press onto test its system and infrastructure and they will start the pilot for Making Tax Digital for VAT by the end of this year.
Software companies have also welcomed the delay but have stated that the government must provide better communication to ensure that more taxpayers are aware of the biggest overhaul in tax administration in a generation.
The Treasury document states that under the new timetable:
- Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes.
- Qualifying businesses 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.
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.
At WHA we are fully aware of the changes taking place, and will update you as and when they come into play.