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Tax & admin Fred Heritage · 8 March 2017
Spring Budget 2017: Making Tax Digital delayed by one year for firms below VAT threshold
The government has promised to give unincorporated business owners and landlords with annual turnover below the VAT threshold an extra year before Making Tax Digital becomes mandatory. In his Spring Budget announcement on 8 March, chancellor Philip Hammond said that until April 2019, these small business owners would be given 12 months more to prepare for the switch to digital tax record keeping, which will include quarterly updates to HMRC. In his speech, Hammond said the move would come at a ?280m cost to the exchequer, but that it was ?in response to concerns about the timetable expressed by business organisations, and by several [MPs] including the chairman of the Treasury select committee.? The announcement will be welcomed by many of the country?s smallest business owners who remain in the dark about the government?s Making Tax Digital initiative. Introduced originally by former chancellor George Osborne in 2015, the plan to digitise the UK tax system will require business owners to submit tax returns online four times a year, rather than once annually, as well as provide an end of year tax update to HMRC, by 2020. Tax experts have also welcomed news of the deferral. Tax partner at PwC, Stella Amiss, said following the announcement: ?It is encouraging to see those at the sharp end of the new proposals get an extra 12 months to be ready. Let’s hope?HMRC uses the time to pilot systems thoroughly before their use is made mandatory.? She added, however, that it would remain important the government ensured that owners of slightly larger businesses kept their Making Tax Digital responsibilities in mind. “For those just outside the ?85,000 threshold for a 12-month deferral, it is important that HMRC guarantees that the concerns that have led to this relaxation are not forgotten in making sure implementation is a success,? she said. The government has been blamed for not providing enough information about how Making Tax Digital will affect small business owners. At the beginning of 2017, as many as 84 per cent of freelancers and micro business owners said they had not received enough information about the impact of the initiative. Despite being due for rollout in April next year, some 20 per cent of the smallest UK business owners had not even heard of the government?s digital tax plan, according to a survey conducted in January by FreeAgent. Brian Palmer, an adviser on tax policy for the Association of Accounting Technicians (AAT), said that increasing the threshold was a positive development. ?A higher threshold will increase the effectiveness, value for money and credibility [of Making Tax Digital]. ?Less than five per cent of AAT members supported the originally proposed ?10,000 VAT threshold, so an initial increase to ?83,000 is most welcome,? he added. Spring Budget 2017: Tax free dividend allowance slashed for small businesses
ABOUT THE EXPERTFred Heritage
Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.