Minister confirms Making Tax Digital delayed until 2019 for some businesses

Jane Ellison, finance secretary to the Treasury, has confirmed that the introduction of Making Tax Digital (MTD) for the majority of businesses will be delayed to 2019 to allow them more time to prepare, an announcement first referenced in the swathe of consultation documents released on 15 August

Addressing the HMRC annual conference, Ellison, Conservative MP for Battersea, who succeeded David Gauke when he was promoted in the recent reshuffle, said: ‘You told us that even slightly larger businesses might need more time to prepare for the new system, so we have proposed deferring the introduction of any changes to 2019 for those businesses too.’

Ellison did not address the issue of quarterly updating of online tax records, which has proved contentious, but did point out that MTD proposals had been modified in response to consultation feedback, including an additional exemption for over a million (1.3m) landlords and micro businesses from the proposed changes, plus a decision to defer the introduction of any changes until 2019 for some SMEs.

The outcome of the current mass consultation on MTD could see a one-year extension for other small businesses, although the threshold for this group has not been defined as yet.

The threshold for larger businesses has not been decided and HMRC stressed that this is an integral part of the consultation process, where the tax authority said that it is looking for expert advice from key stakeholders on a realistic and workable earnings limit for MTD exemption.

The very smallest businesses with turnover of less than £10,000 have been exempted from MTD, so effectively part time sole traders and a sub set of micro businesses.

HMRC has stressed that other unincorporated businesses and buy-to-let landlords will still need to prepare for the launch in 2018 as set out in the open consultation documents.

An HMRC spokesperson told Accountancy: ‘The government has listened to representations made by stakeholders and recognises that some of the smallest businesses may find it difficult to transition to the new MTD requirements.

'As a result the government has now announced that it will remove a further 1.3m of the smallest businesses from the scope of the changes by exempting all unincorporated businesses with annual turnover of less than £10k from digital record keeping and quarterly updates, although they will be able to choose to do so If they want to.

'The government is also deferring introduction of the changes until 2019 for a further group of the smallest unincorporated businesses still within scope to give them additional time to prepare if they want it, We are consulting on the detail and considering the case for providing further financial assistance to help businesses transition to Making Tax Digital for business.'

In her speech, Ellison conceded that MTD marked a major change in the way tax administration operated, but said having an online account which can be accessed any time from any device would make life more straightforward for millions of people and businesses.

‘They will even be able to spread their payments by just paying as they go, if that’s easier for them,’ she said. ‘And they’ll know what they owe as they go along – not get any, nasty or nice, surprises when the annual tax bill drops through the letterbox.’

Ellison said HMRC’s aim was to offer businesses and individuals the kind of digital services they expect in the 21st century, pointing out that many people now handled much of their admin online.

‘And it’s just not right that our tax service should lag behind – stuck in an age of paperwork, letters and phone calls.

‘That’s why we want HMRC to offer all our customers a top quality, fully digital service alongside its existing services,’ Ellison said.

She said the government had made the necessary ‘big billion pound investment’ to do MTD, while HMRC had ‘the talent, know-how and determination to do it’.

HMRC released six consultations setting out plans for the transition to MTD covering businesses, self-employed, individual taxpayers, pensioners and landlords. The consultation period runs until 7 November 2016. A summary of the six consultations is available here.

 

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