In response to the feedback it received from businesses and industry, the government has outlined a raft of proposals in relation to its new Making Tax Digital (MTD) initiative. Many of these relate to the Making Tax Digital for Business (MTDfB) scheme.
Free software will be provided to businesses with the ‘most straightforward’ tax affairs, and firms will also be permitted to use spreadsheets for their record-keeping. However, these must meet the relevant requirements of MTDfB. Charities (but not their trading subsidiaries) will be exempted from the need to keep records digitally.
MTDfB will be deferred until 2020 for partnerships with turnover exceeding £10 million, while the cash basis entry threshold for unincorporated businesses has increased to £150,000 and the exit threshold to £300,000.
Taxpayers will be given at least 12 months to familiarise themselves with the new quarterly reporting changes before any late submission penalties are applied.
Further changes were also unveiled in the 2017 Spring Budget, including a one year deferral from the mandating of MTDfB for unincorporated businesses and landlords with turnovers below the VAT registration threshold (£85,000 from 1 April 2017). They will now be required to start using the new digital service from April 2019.
Please note that following Theresa May’s decision to call a snap General Election on 8 June, the government removed legislation to implement MTD from the Finance Bill 2017. The clauses are likely to be reinstated after the election.
As your accountants, we will continue to assist you with your tax affairs, and will be keeping you up-to-date with the latest MTD developments.