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Making Tax Digital - Update

The government has delayed rollout for Making Tax Digital until “at least” 2020, although quarterly reporting using the system will be mandatory from 2019.

Deferral of the plans for digital tax reporting follows opposition from MPs, businesses, accountancy professionals and the Treasury Committee to the proposed rapid rollout timetable which required businesses with turnover of more than £10,000 to invest in new software and make quarterly uploads. The delay in implementation is welcome news for businesses as it gives them more time to prepare for the move to digital record keeping and will also allow HMRC more time to pilot quarterly reporting.

Under the new timetable:

·       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.

Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.

This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital reporting system, but it will not be mandatory until “at least 2020”.

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.

All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.

HMRC will start to pilot Making Tax Digital for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in spring 2018. This will allow for over a year of testing before any businesses are mandated to use the system.

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.”

For advice on how the digitalisation of income reporting will affect you and assistance with making the transition to Making Tax Digital as simple as possible, please contact your local Rothmans office.

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