The government has delayed its Making Tax Digital (MTD) plans for an estimated 3 million small businesses and landlords.
MTD will initially be available on a voluntary basis, so businesses with an annual turnover below the VAT threshold (currently £85,000) can choose when to move to the digital accounting system.
Under the new timetable outlined by HMRC:
- only businesses with a turnover above the VAT threshold will have to keep digital records (for VAT purposes only) from 2019
- businesses and landlords will not be required to keep digital records and update HMRC quarterly, for other taxes until at least 2020.
As VAT already requires quarterly returns, no business will need to provide any more information to HMRC more regularly than they do now.
All businesses will have at least 2 years to adapt to the changes before being asked to keep their tax records digitally.
These changes are expected to be passed through Finance Bill 2017, which is set to be announced sometime after parliament returns on 5 September 2017.
Mel Stride, the financial secretary to the Treasury and paymaster general, said:
“We have listened very carefully to their concerns and are making changes so we can bring the tax system into the digital age in a way that is right for all businesses.”
Mike Cherry, chairman of the Federation of Small Businesses, added:
“This promises to make the roll out far more manageable for all small firms.
“We look forward to receiving more detail from the Treasury on requirements for those small firms above the threshold that will have to comply from 2019.”