Should the Chancellor have done more to address the confusion around Making Tax Digital in his Spring Statement?
The Government plans to press on with its widely criticised tax reporting changes for VAT-registered businesses but has postponed introducing similar reforms for income tax. From April 1, the vast majority of small businesses with a turnover over the £85,000 VAT threshold will be required to submit quarterly returns online using specialist software. These changes are dubbed Making Tax Digital (MTD) and have been criticised by small business owners, trade bodies and MPs, who fear they are an excessive burden on the self-employed. Despite calls to postpone or cancel the new rules, which will take effect two days after the UK is scheduled to leave the European Union, Chancellor Philip Hammond reaffirmed his plans in the Spring Statement.
However, Mr Hammond offered some consolation for self-employed people. Similar new reporting standards for income tax were expected to be introduced from April 2020, but these changes have been pushed back by at least a year. Brian Palmer of the Association of Accounting Technicians, a trade body, welcomed the delay. “That there will be no further mandation of MTD until 2021 will come as great relief to many businesses and individuals alike,” he said. For the upcoming VAT changes, the Government once again stated that HMRC would not administer any fines to small businesses struggling to meet the new requirements in the first year after implementation. “No penalties will be applied to businesses that are doing their best to comply,” Mr Palmer added.
Our VAT Director Sue Rathmell comments: “Brexit presents more than enough problems for British businesses right now, so it’s disappointing that Philip Hammond didn’t take the opportunity to delay or otherwise mitigate the confusion surrounding the Making Tax Digital rollout for VAT. “The process has been hindered by a lack of communication from HMRC and as a result some businesses have purchased expensive software they don’t truly need right now.”
A version of this article originally appeared in the Telegraph. Read the full article here.