In a notice issued on 30th April, it was announced that the government was implementing a new initiative; Making Tax Digital (MTD). However, it was later reported that the legislation had been put on hold.
It was delayed until 1 April 2019. From that day, VAT-registered businesses that would be above $85,000 will be required to keep their digital records and submit their VAT returns using Xero software.
Additionally, other components of MTD such as corporation and income tax had been put on hold until April 2020.
What is MTD?
It is part of the government’s plan to make it easier for individuals with personal and corporate businesses to stay on top of their online business affairs.
In the statement, it was also announced that the aim of the project was to provide a smooth transition to the digital revolution that is set for 2020. The delay does not affect the VAT registered businesses although it has an impact on MTD for income and corporate tax.
To some, the announcement of the delay on MTD did not come as a huge surprise as professionals had assumed HMRC had taken longer than expected to make the move.
John Thompson, the Permanent Secretary in HMRC, told the Conservative MP Lee Rowley that they had decided to make tax credits an online service for the new tax credit claimant. He informed that due to unavoidable circumstances they had to postpone the project to April 1st 2019.
He also added that the primary drive, which was to introduce MTD for business still remained on the timescale. Conversely, he also informed that the ultimate goal, which was mainly aimed at providing a single financial account for business owners, had been deferred.
As the preparations for the sophisticated project are underway, there were concerns of some of the projects being prioritized over others. As a result, HMRC gave a triple weighting to the planners, a double weighting to cost-efficiency, and another double weighting to the receipts, so that they are prioritized as scheduled. It was noted that projects with lower rates of driving receipts or cash-efficiency were likely to be given less attention.
Among some of the main reasons for introducing MTD was to assist in reducing the $34 billion tax gap. Up-to-date, around $10 billion is said to be lost through mistakes made in the SME sector.
In fact, statistics reveal that it accounted for 46% of the tax lost, hence the introduction of MTD. Its original goal was, however, intended to target smaller traders. Basing on the MTD timetable on income tax, it was regarded as the best choice for any business.
While for corporate and individual businesses not registered for VAT it still remains unwelcome news, to some business is still going on normally as they wait for the MTD scheme that is scheduled to change over 250 projects and transforms 15 programs. Although 11 projects have already been completed, there will be an additional 81 projects that are scheduled to be completed by 2020.
If you need helping getting your company ready for the expected start of the Making Tax Digital scheme in April 2020, get in touch with the expert team here at DLR Accountants; we serve clients large and small nationwide, and can help your business no matter its size.