A trade organisation representing investors in Britain has moved to welcome changes in requirements from certain small business and landlords below the VAT threshold to process their tax affairs digitally.
The Making Tax Digital requirements have been put on hold for a year, with a longer lead in period for those with a turnover below the VAT threshold of £85,000. These investors will not have to switch until the system’s worth has been proven.
Under the fresh timetable announced by Financial Secretary to the Treasury Mel Stride, only those with a turnover above £85,000 will be permitted to keep digital records from 2019 and only for VAT requirements.
Businesses will not be required to keep digital records, nor to update HMRC quarterly for other taxes until at least the year 2020. In addition, Making Tax Digital will be available on a voluntary basis for the smallest businesses.
Stride believes, ‘This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.’
‘As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now. All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes,’ he continued.
The switch to digital filing was announced by former Chancellor George Osborne, with a view to digitising the tax system.
However, these plans faced criticism from the Treasury Select Committee, MPs and professional bodies, such as the National Landlords Association. During the consultation process, the NLA said it believed that the £10,000 income threshold for unincorporated property businesses should be raised. In addition, it highlighted concerns with the workability of the software and called for a longer lead-in period.
Stride acknowledged that the changes made now mean that three million of the smallest businesses and landlords will be able to move to the new system at a pace that suits them.
‘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,’ he pointed out. ‘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,’ Stride noted.
Richard Lambert, chief executive officer of the NLA, welcomed the change: ‘We are pleased that the government has finally listened to the concerns raised by the NLA on behalf of landlords who would have been dragged into a system of tax reporting rushed into being before they or it are ready.’
‘While we have always supported simplifying the tax system, we were concerned by the issues raised by the Making Tax Digital programme, and welcome the changes as they address exactly the points we’ve been raising since the initial announcement.’