Government revises ‘Making Tax Digital’ timetable

August 29, 2017

HMRC’s Making Tax Digital project was originally scheduled to be introduced in spring 2018, starting with quarterly online reporting of income and expenses for unincorporated businesses (sole traders and some partnerships) and landlords; with a view to achieving full digitisation by 2020 for all taxpayers (other than those with turnover < £10K or those digitally excluded).

What are the changes?
The new timetable announced sets out plans as follows:

• Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
• They will only need to do so from 2019
• Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020

What does this mean?
While there is a definite recognition that digital reporting is a good idea, and is still the direction of travel; smaller businesses will not be required to use the system, but can move to digital reporting at their own pace on a voluntary basis.

This is good news as the deferral will give more time for testing the system before the VAT system goes live in April 2019.

As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now – just potentially in a different format and possibly with more detail of individual transactions within the submissions. The detail of what will be required by HMRC should be included in a Finance Bill in autumn 2017.

All businesses and landlords will now have at least a further two years to adapt to digital reporting to HMRC for taxes other than VAT.