Small firms will be experiencing a sense of relief this morning, as changes are announced to the controversial and revolutionary new digital tax system.
Making tax digital (MTD) was announced back in the March budget of 2015, and would have required small businesses to keep digital records and file them with HMRC. The original plan was for MTD to be rolled out in April 2018 for larger businesses and for a fully digital system for nearly all businesses and landlords to be in place by April 2020.
However, it was released yesterday that the time table for introducing MTD has been delayed with the main concern being that the switch over to digital was too big a challenge at too fast a pace. The Government claim that they have listened to the concerns of small business owners by making the relevant tweaks in order to delay the process.
It has now been revealed that under the revised plans, only businesses with a turnover of more than £85,000 (above the VAT threshold) will be required to keep digital records, and only for VAT purposes, starting from April 2019. Businesses and landlords will now not be required to keep digital records or to update HMRC quarterly for any taxes other than VAT, until at least 2020 under the new announced proposals, although it will be possible for such businesses to voluntarily opt into MTD before 2020 if they wish to do so.
Small business owners have praised the delay, after a lot of speculation and concerns about the process being ‘rushed’. The original rules meant that small businesses had to potentially prepare for a financial strain as they may not have been fully ready to commit to the additional administrative and financial demands of the digital process being put into practice as early as April 2018. They will now have more time to prepare and it is possible that for some smaller businesses and landlords they will not be forced to use MDT at all but will be able to choose to enter the system if and when it suits them to do so. Small business owners will also be delighted that they do not face the prospect of making at least six separate filings to HMRC each year for at least another 3 years.
There was very little detail contained in yesterdays announcement, and no doubt further clarification of exactly what the government is planning will follow over the next few days, weeks and months.