HM Revenue & Customs (HMRC) has announced considerable changes to its plans for Making Tax Digital (MTD).
The government stated that it has listened to concerns raised by the Treasury Select Committee and business in regard to the pace of change and the introduction of MTD, and is committed to ensuring a ‘smooth transition to a digital tax system’.
Some of the significant changes to the MTD initiative include the requirement for only those businesses with a turnover above the VAT threshold of £85,000 to keep digital records, and only for VAT purposes. VAT already requires quarterly returns, so businesses will not need to update HMRC any more regularly than they do now. These businesses will need to keep digital records for VAT from April 2019.
Firms and landlords with a turnover below the VAT threshold will not be required to make use of this system, but can opt to utilise it if they so wish.
Additionally, businesses will not be required to keep digital records or update HMRC quarterly for other taxes until ‘at least 2020’.
HMRC intends to pilot Making Tax Digital for Business (MTDfB) for VAT on a small scale by the end of this year, and will live pilot from Spring 2018.
Mel Stride, Financial Secretary to the Treasury, commented: ‘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 changes to MTD will be legislated for as part of Finance Bill 2017, which will be introduced ‘as soon as possible’ following the government’s Summer recess.