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Making Tax Digital delayed due to Brexit
Last week, HMRC announced that it was putting a halt on some of its Making Tax Digital plans due to resources being stretched by Brexit. Nottingham based chartered accounts Clayton & Brewill provides an update on Making Tax Digital and explains what areas are being delayed and why.
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC’s plan to modernise and simplify the tax system, by moving to a digital system.
The plan is that all taxpayers will have access to a secure digital tax account, like an online bank account, where they will be able to interact with HMRC.
You will be able to register, file, pay and update your information at any time of the day or night, and at any point in the year, to suit you. The vast majority, will no longer need to submit the dreaded annual tax return.
Making Tax Digital for businesses
Originally it was planned that some businesses would have to provide digital updates to HMRC on a quarterly basis from 2018, with a view to rolling out the requirement to most businesses by 2020. However, last year, the government announced that these plans would be delayed and announced a new timetable.
The new timetable proposed that only businesses with a turnover above the VAT threshold would have to keep digital records from April 2019, with plans to roll out digital reporting requirements to other businesses from April 2020.
What is being delayed and why?
Plans for further developments to personal online tax accounts – which would allow users to have a complete overview of their income, including bank interest and dividend payments – have been halted.
Simple Assessments have also been put on hold. Simple Assessments were recently introduced as a way of calculating and collecting tax from those with the most straight forward tax affairs, without them having to complete a self assessment tax return.
There has been no indication when HMRC plans to restart these projects, although it’s highly unlikely it will meet the 2020 deadline which the government originally set for the whole of the MTD initiative.
The delays come as a result of HMRC being busy with Brexit preparations – they simply don’t have the resources to dedicate to both MTD and Brexit.
What will go ahead?
The MTD plans for businesses is, currently, still set to go ahead in line with the revised timetable announced last year.
This means that businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records for VAT purposes from April 2019. And from April 2020, these and others businesses below the VAT threshold may be asked to keep digital records for other taxes and provide quarterly updates to HMRC.
However, many experts expect that it is likely that the timetable may be delayed further as we get closer to 2020. If that were the case, it would no doubt be welcomed by many as it will allow businesses the time to ensure they have the correct procedures and systems in place in order to comply.
Whilst the timescales are still in doubt, it is advisable to adopt a sooner rather than later approach to getting prepared for the changes. Getting systems in place will allow you to resolve any issues well in advance.