A statement made yesterday by HM Treasury announced plans to digitise the tax system will be delayed to allow businesses more time to prepare.
The reformed timeline for Making Tax Digital (MTD) is centred around VAT, with businesses over the VAT threshold (currently £85,000) required to keep digital records only for “VAT purposes” from 2019.
Small business under the VAT threshold “will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020”.
While still supporting MTD, the Treasury have acknowledged that the timetable would not have allowed a smooth transition for small businesses in particular. The change to the MTD timeline comes after the proposed plans were challenged by a number of MPs and accounting bodies.
Mel Stride, Financial Secretary to the Treasury, said in the statement: “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”.
Prior to this announcement, MTD would have been implemented from 2018 for businesses above the VAT threshold, while smaller businesses were expected to digitise their taxes from April 2019, a delay that was announced as part of the Spring Budget in March this year.
Pandle director, Lee Murphy, said: “The delay to the Making Tax Digital initiative is a welcome one and provides a more reasonable timeline for smaller businesses to prepare for the changes. The delay will also allow developers of accounting software to create more effective and tailored solutions, which will help businesses when Making Tax Digital does come into effect.”
Murphy also commented on how this delay will not only help businesses and accounting software developers prepare, but will give HMRC adequate time to get their own systems in place: “HMRC will also have more time to ensure they’re ready for the volume of businesses who will be submitting tax returns digitally, so it’s a positive move for all.”