During the Chancellor’s Spring Budget last week (March 8th, 2017); Philip Hammond announced a delay for the introduction of digital administration for tax reporting for a year.
The delay, until April 2019, only applies for firms below the VAT threshold (£83,000).
Announced in George Osbourne’s 2015 Budget speech, Making Tax Digital would be ‘The end of the tax return for millions’; aimed to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
Making Tax Digital is a £1.3bn investment programme that will mark a fundamental change in the way that businesses interact with HMRC.
Every taxpayer will have a Digital Tax Account; a Personal Tax Account for individuals and a Business Tax Account for businesses, accessible online.
By 2020, individual taxpayers and businesses will be able to register, file, pay and update their information at any time, all online
HMRC will collect and process information affecting tax in as close to real time as possible, preventing tax liabilities or repayments from building up.
Businesses will use accounting software to record transactions and make quarterly submissions to HMRC which contain details of income and expenditure for the quarter.
During his budget speech Philip Hammond said he had ‘recognised the burden that the move to new digital, quarterly tax reports may put on small firms’ and thus delayed the introduction for some firms.
The move, the Chancellor said, would cost the Revenue £280m in the relevant year.
Businesses over the VAT threshold will have to report under quarterly reporting from April 2018.
Between 2.5m and 5m businesses likely to be affected as HMRC aims to become the most digitally advanced global tax administrator by 2020.
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