Making Tax Digital (MTD) – the government’s drive to digitise the tax system – has been delayed amid concerns over “the pace and scale of change.”
Ministers announced last week that businesses will not be asked to keep digital records, or to update HMRC quarterly, until at least 2020.
Businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records purely for VAT from 2019.
The new timetable represents a significant revision of the previous roll-out plan for MTD, under which large and small businesses would have been affected from 2018 and 2019 respectively.
By delaying implementation, the government hopes to ensure that businesses have plenty of time to adapt to the changes.
Mel Stride MP, Financial Secretary to the Treasury, 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.
The Institute of Chartered Accountants in England and Wales (ICAEW) welcomed news of the delay.
Paul Aplin, ICAEW Deputy President, said:
It’s great that the Government has listened to both the voice of business and the profession on Making Tax Digital. Removing mandation for the smallest businesses is a welcome step forward and is one less regulatory burden for SMEs to worry about. We now look forward to working closely with HM Treasury and HMRC on creating a world-class digital tax system that businesses of all sizes will want to use.
How Making Tax Digital will affect contractors and the self-employed
Eventually, the advent of a fully online tax system will mean the end of the traditional self-assessment tax return – an annual exercise that currently must be undertaken by both limited company contractors and self-employed individuals.
Don’t get too excited, though. In its place will come tax accounts that must be updated online once a quarter.
Critics argue that increasing the frequency of tax deadlines – even if the actual process of submitting information to HMRC is made easier – will add to the administrative burden on business owners and the self-employed.
Digital tax delayed – the ADVANCE verdict
News of the delay is therefore welcome.
Creating a fully digitised tax system for millions of people is no simple task, so it’s vastly preferable that the government takes its time when introducing it rather than rushing ahead.
As a premium partner of market-leading accounting software provider FreeAgent, here at ADVANCE we will be keeping a close eye on all things MTD over the coming years, ensuring affected contractors stay informed along the way and are ready for MTD when the time comes.