Businesses below the existing VAT threshold of £85,000 will be exempt from the Government’s flagship Making Tax Digital (MTD) project, it has been announced.
The news follows widespread concerns voiced by tax and accountancy bodies that the Government’s previous MTD exemption threshold of £10,000 was far too low and would only benefit the UK’s very smallest microbusinesses.
It also marks the first MTD update publicised by HM Revenue & Customs (HMRC) since the project was scrapped from this year’s Finance Bill prior to the General Election.
In the interim, it appears that HMRC has also buckled under mounting pressure to reassess its previously imminent MTD timetable.
Previously, the tax authority had said that all tax would be 100 per cent digital by 2020 – and that MTD would be rolled over for landlords and sole traders in April 2018, who would be shortly followed by larger businesses and corporations.
All businesses with an annual turnover above £10,000 would have needed to be MTD-compliant.
Under HMRC’s reformed timetable, however, the project’s rollout has been delayed by a year and will not be phased in until 2019.
From this point, businesses with a turnover above the VAT threshold of £85,000 will be expected to begin keeping digital records for VAT purposes, but ‘full-blown’ quarterly reporting for all other purposes will not begin until ‘at least 2020’.
Mel Stride, financial secretary to the Treasury and the new minister in charge of Making Tax Digital, said: “Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.
“We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”