Making Tax Digital gets a step closer
More information has been published on how businesses, the self-employed and landlords will be affected by Government plans to modernise the tax system.
Following extensive consultation, HMRC has now published new details on how Making Tax Digital will work. After listening to the concerns of businesses and agents, HMRC has amended some of its plans.
As it stands, all self-employed businesses and landlords with a turnover under £10,000 a year will not have to keep their records digitally or make quarterly updates, but can do so if they wish. However, the Government has said that this exemption threshold may be increased before the legislation is introduced later this year.
The Association of Accounting Technicians (AAT) has welcomed this news. Adam Harper, AAT director of strategy and professional standards, said: “AAT was the first to suggest that the qualifying threshold for MTD should be set at the current VAT threshold of £83,000, falling to the personal allowance of £11,000 over a three year period.”
HMRC has tackled a number of other key concerns raised by SMEs, accountants and business bodies. It says free software will be available to the majority of the smallest businesses and that those firms that cannot go digital will not be required to do so.
The option to account for income and expenditure on a simple “cash in, cash out” basis will be extended, which HMRC says will help an extra 2.5 million self-employed businesses and unincorporated landlords.
Other key details include:
- Businesses will be able to continue to use spreadsheets to record receipts and expenditure, which they can then link to software to update HMRC;
- Charities will not have to keep their records digitally or make quarterly updates;
- Customers will have at least 12 months to become familiar with the changes before any late submission penalties will be applied.
HMRC also said it plans to pilot the new digital systems with “hundreds of thousands” of businesses before rolling them out to ensure the software is user-friendly, and to give tax-payers time to prepare. However, the Government is still planning to start MTD in 2018 and complete the digital transition by 2020.
However, Mike Cherry, national chairman of the Federation of Small Businesses (FSB), described this timetable as “a total fantasy”. He said: “It is unachievable given the latest delays announced today. We will … press for implementation in 2020, not next year.”