With the dust barely settling on the Chancellor Philip Hammond’s first and last Spring statement, we take a look at the much-anticipated announcements on HMRC’s Making Tax Digital (MTD) scheme.
The Chancellor has pledged that small businesses and landlords who come under the VAT threshold will have an extra year to prepare for MTD.
Unincorporated businesses that have an annual turnover below the VAT registration threshold of £83,000 will have until April 2019 to prepare before MTD becomes mandatory, giving them more time to prepare for digital record keeping and quarterly updates.
The government will also consult on the design aspects of the tax administration to try and simplify the system for taxpayers, including interest and penalties.
MTD was announced in the March 2015 Budget, to transfer tax records to digital software and update HMRC quarterly, rather than once a year.
What do the changes mean?
The changes will ease the financial burden on small businesses to invest in accounting software and training for MTD’s rollout beginning April 2018.
It adds them to a group already exempt from having to make tax digital, those with an annual turnover below £10,000, in addition to those removed by the exemption for secondary income below £10,000.
The deferral will mean little to larger firms and businesses already beginning to implement digitised systems across their businesses in readiness for MTD and 2017 will see digital a top concern for firms.
The changes are welcomed, with Brian Palmer, tax policy adviser, Association of Accounting Technicians, commenting: “We remain concerned about the timetable and costs for implementing MTD but increasing the threshold is a positive development.
Chas Roy-Chowdhury, head of tax at ACCA, agrees that it is a step in the right direction, but goes one step further, saying:
“We welcome the move to delay the implementation of MTD for one year, for businesses with turnover less than £83,000.
“However, we would encourage the government to continue with this carve-out indefinitely: excluding businesses within this threshold altogether as they are most impacted by the additional administrative burden that MTD filings would create.”
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