Tuesday, 25 July 2017
SMEs Below VAT Threshold to be Exempt From Making Tax Digital
Following pressure from SMEs about the pace and scale of change the government has announced that the roll out for Making Tax Digital for Business will be amended to ensure businesses have plenty of time to adapt to the changes.
Businesses will not now be mandated to use the Making Tax Digital for Business system until April 2019 and then only to meet their VAT obligations. This will apply to businesses who have a turnover above the VAT threshold - the smallest businesses will not be required to use the system, although they can choose to do so voluntarily.
This change means that no business will need to provide information to HMRC under Making Tax Digital for business more regularly than they do now. VAT has been online since 2010 and over 98% of VAT registered businesses already file electronic returns.
Making Tax Digital will build on this by integrating digital record-keeping to provide a single, seamless process with quarterly updates generated and sent direct from the software the business/agent uses to keep their records.
The government has committed that it will not widen the scope of Making Tax Digital for Business beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread.
Mike Cherry, Federation of Small Business (FSB) National Chairman, said "This is a positive decision, and will be a real lifeline for small firms already facing a hugely challenging economic climate. Thanks to the Chancellor’s intervention, they will only fall into scope when ready to do so.
“Today’s announcement promises to make the rollout of the programme far more manageable for all of the nation’s 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. We will continue to work together on how we can best support these businesses as well as those that voluntarily opt into the programme over the coming years.”