HMRC have announced significant changes to the Making Tax Digital (MTD) scheme.
Under the reformed timetable, only businesses with a turnover above VAT threshold £85,000 will have to keep digital records for VAT purposes, this will take affect from 2019. Furthermore, businesses will only be required to update HMRC quarterly for other taxes and make the switch to MTD from 2020.
The Treasury have accepted the need to relax the timetable surrounding MTD in order to ensure businesses are able to comfortably transition, however, they still support the original initiative that the legislation needs essential changes to modernise the tax system.
Consequently, this means that 3 million of the smallest businesses and landlords will now have the option to voluntarily make the switch to digital record keeping at their own pace before it becomes mandatory.
How have businesses responded to the change in MTD?
Early responses from the industry have welcomed the more relaxed MTD legislation. Mel Stride, Financial Secretary to the Treasury and Paymaster General stated “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.”
For now, businesses won’t need to provide HMRC with information more regularly than usual, as VAT already requires quarterly returns. They will also continue with their MTD trial and will begin to pilot MTD for VAT by the end of the year on a small, private scale. They will then widen the scope into the public sector starting in spring 2018.