It was recently announced that Making Tax Digital is facing a reform of it’s original plans. In a HM Treasury statement from Paymaster General Mel Stride, it was confirmed that MTD is being stripped back to only cover VAT for now.
This means that only businesses that are above the VAT threshold of £85,000 will have to start filing their taxes digitally and quarterly from April 2019, using compatible software.
The thinking behind this is that businesses over the VAT threshold already have to report quarterly so this isn’t really an extra set of deadlines for them.
The Treasury said that small businesses below this threshold “will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.” So this doesn’t mean you shouldn’t still prepare for MTD.
Good news for many SMEs
The government’s original stance was that Making Tax Digital would see all companies in the UK change the way they do tax by April next year. However, the scheme has been hit with plenty of criticism on the behalf of the smallest businesses. For those that don’t currently file their returns online or know how to do so, this will likely mean that businesses will have to invest money into the scheme.
MTD has been called too much too soon for these businesses who will also have to spend time and money training staff to make sure they’re up to speed with the new expectations. So this delay announcement has come as welcome news to those who thought the deadline unrealistic.
General Stride who inherited responsibility for MTD said: “We have listened to concerns raised by parliamentarians, in particular the Treasury Select Committee, businesses and professional bodies about the pace of change.”
“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,” the Treasury said. However, businesses under the threshold can still voluntarily start before then.
MTD’s uncertain beginnings
Making Tax Digital has been off to a wobbly start with plenty of different business groups disagreeing with the amount it’s likely to cost the average business. It was also left out of the Finance Bill earlier this year, prompting speculation that it was being cancelled after all. Then the General Election saw it swept out of the spotlight.
On the digital side of things, MTD has faced slow progress from HMRC. Interestingly, it seems that many of the people working on the MTD scheme were freelancer computer programmers who have recently left the public sector due to IR35 changes.
Are you happy about the delay? Do you think MTD is a good idea? Let us know what you think.