HMRC has this week announced significant changes to the roll-out of its Making Tax Digital scheme, which was due to go live from April 2018.
Following feedback and concerns about the broad scope and short timescales from parliamentary bodies, businesses, the accounting profession and software companies, including Xero, the scope and timetable have now been pared back as follows:
- Only businesses with a turnover above the VAT threshold will have to keep digital records and only for VAT purposes. They will only need to do so from 2019.
- Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least 2020, instead of 2018 as originally proposed.
- Small businesses will be able to file digitally on a voluntary basis for other taxes.
As a digital advocate, we support HMRC’s vision for a digital tax system, and not least because of the £8Bn tax gap the government attributes to poor record-keeping practices by SMBs.
It’s crucial that businesses and the accounting industry are given adequate time to adapt to new methods of compliance record-keeping. And where possible, any new rules should also improve SMB and accountant productivity and not just satisfy HMRC’s own agenda.
The UK still languishes at the bottom of the table of G8 nations for productivity; it follows that smarter and more productive UK SMBs will play an important role in securing our economic future at the same time as creating vital new jobs in the next decade. So this extra time to build and bed down new digital processes for SMBs and accountants is welcomed, and I’m glad that HMRC has responded to the many concerns raised.
Getting ready for Making Tax Digital will be a key theme for Xerocon London 2017 this autumn, and we’re looking forward to taking you through Xero’s strategy and the many product innovations we’re working on.