Making Tax Digital pushed back to 2020 at the earliest

Thursday 31 August 2017

The government has pushed back its roll out of Making Tax Digital (MTD) to 2020 at the very earliest.

Due to the new timetable, only companies with a turnover above the VAT threshold of £85,000 will need to keep digital records from 2019. Other businesses will not be asked to switch to MTD until 2020.

Although the digitisation of tax is seen by most as a necessary move, the pace of implementation left many small firms concerned they would be left behind. 

Thanks to the new timetable, these companies will have the chance to voluntarily switch to MTD before it becomes compulsory. The change came about following concerns from the business world and the Treasury Select Committee. 

Now, HMRC will continue with their Making Tax Digital pilot by the end of the year. This will operate on a small and private scale before it is widened in Spring 2018.

Mel Stride, Financial Secretary to the Treasury and Paymaster General 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.”

Chas Roy-Chowdhury, head of taxation at Association of Chartered Certified Accountants, said that many small businesses were concerned about MTD, or simply did not know about it. 

Mr Roy-Chowdhury explained that HMRC will benefit from the delay, as it gives them more time to guarantee the correct systems are in place. 

MTD left many small businesses concerned when it was originally announced, with many startups and self-employed professionals worried about meeting the criteria in time. 

Thanks to the delay, these companies can now take some time to consult freelancer and contractor accountants to look over their finances and ensure they meet the new law.

These experts will be able to provide valuable guidance during a transitional period for small businesses. 

Along with MTD, the government announced its plans for the Summer Finance Bill, which will be introduced after the summer recess on 5th September. 

The bill will legislate all policies laid out in the pre-election Finance Bill, including a cut to the annual tax-free allowance on dividend income from £5,000 to £3,000. This would generate nearly £1 billion extra in tax annually by 2020. 

By Victoria McDonnell

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