The Chancellor bowed to public demand in his Budget speech by announcing a 12-month delay in the original Making Tax Digital (MTD) timeplan for unincorporated businesses turning over more then £10,000 to start filing online from April 2018.
HMRC documentation confirmed that a one year deferral from mandating MTD for business for unincorporated businesses and landlords with turnovers below the VAT threshold.
"Only those businesses, self-employed people and landlords with turnovers in excess of the VAT threshold with profits chargeable to Income Tax and that pay Class 4 NICs will be required to start using the new digital service from April 2018," the tax department said.
Ahead of the Budget Rebecca Benneyworth speculated that the Chancellor might opt for this formula. “Not because I know the answer, but it seems to reconcile the tension about what they want to do,” she said.
As chair of HMRC’s Digital Advisory Group, Benneyworth has been lobbying the tax department along with several professional tax bodies to bring in the over-£83,000 [£85,000 from 1 April] first to mandatory quarterly reporting and then to phase in smaller businesses a year later.
“Start with digital record keeping and don’t worry about deadlines and penalites until we know it’s up and running and can get all the wrinkles ironed out,” she said.
Benneyworth advised practitioners supporting small businesses not to go to sleep for the next 12 months, but to use the extra time to start planning and moving non-digital clients into online record-keeping in good time.
Many within the profession reacted with relief during the speech before heading to HMRC's website for confirmation.
Even Xero's UK managing director, Gary Turner, who some on AccountingWEB wrongly accuse of being some kind of MTD Svengali joined the chorus:
Very sensible. https://t.co/4svSlEb84J
— Gary Turner (@garyturner) March 8, 2017
"In my discussions with HMRC, accounting industry bodies and after speaking with hundreds of accountants over the last few months, I had grown very concerned that such a short migration window was likely to be disastrous for all concerned, and HMRC really had no alternative but to soften their position," Turner said afterwards.
"A 12-month extension will still mean a lot of work must be done in a compressed timeframe, but it's still a lot better that what was on the table."
But no tax measure every arrives without some friction. In our live Budget panel, AccountingWEB member TonyDJ griped, "So we have all been busy getting clients ready and now we have to tell them not to bother. So much for planning - what lesson does that send to those who plan ahead?"
A lively debate is already underway both in the comments section below and in the MTD: Extra Year Any Answers thread
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