Government pulls back on Making Tax Digital, giving small businesses more time
In response to concerns over time, three million small businesses will now be able to move to the new digital tax system "at a pace that is right for them"
Three million of the UK’s smallest businesses are to be given more time to move to the new digital tax system after the government announced a toning down of its Making Tax Digital initiative.
As part of the updated Finance Bill, businesses will now be able to switch from manual self-assessment to online self-assessment “at a pace that is right for them”
In response to concerns raised by a number of groups, including the Treasury Select Committee, only businesses with a turnover greater than the current VAT threshold of £85,000 will now have to keep digital records for VAT purposes – and only from 2019.
Furthermore, businesses will not be asked to keep digital records, or even to update HMRC quarterly, for other taxes until at least 2020.
Making Tax Digital is part of a wider government vision to “bring the tax system into the 21st century” by enabling all taxpayers to pay their taxes and manage their tax information online.
Now voluntary for the “smallest businesses”, enterprises with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
All businesses will now have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
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Mel Stride, financial secretary to the Treasury and Paymaster General, 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.”