The snap election earlier this year in the UK may not have brought great news for Theresa May but it has sure brought smiles on the faces of those who own small businesses. The controversial digitalisation of taxes had been giving sleepless nights to many business professionals but now they can finally breathe a sigh of relief.
The finance bill that had proposed to make taxes digital for every citizen of the UK had received a lot of flak from the parliamentarians as well as the business community. It was criticised for many reasons but the most prominent among them was the lack of preparation on the part of government to tackle a change of this magnitude.
What has changed since the Election?
The government had earlier proposed that the new digital taxation process would come into effect from April 2018 for those businesses that generated revenues higher than the VAT threshold and paid national insurance and income tax. But a lot has changed since then and here are the latest updates:
- Businesses and individuals with commercial gains below the threshold of VAT (£85,000) can choose when they will make the move to paying taxes digitally.
- There will be no need for businesses to provide HMRC with updates more frequently than they already do.
- Landlords and businesses will be given two years to adjust to the new system and they will not be given a deadline to maintain digital records for taxes other than income tax.
- The rule of providing quarterly updates will not be applicable to charities.
- To record expenditure and receipts businesses can make use of spreadsheets.
Extending the deadline for VAT returns to April 2019 and income tax returns to 2020 will ensure that the government has sufficient time on their hands to execute the change smoothly. At least 3 million small businesses will be benefit from these changes as they will not be required to maintain digital records, at least until 2020.
Despite the many changes it is clear that the general direction in which MTD is headed has remained unchanged and has merely been postponed. The first wave of making taxes digital will only include VAT returns and the other taxes shall be brought on board by 2020. Addressing the concerns of inadequate preparation, the government has assured that the scope of MTD shall not be widened unless the system is known to work properly.
Meanwhile the government will run a series of small pilot tests involving small scale companies for VAT by the end of this year. The bigger and wider live pilot will begin by the spring of 2018 which means that the systems will be extensively tested for at least a year before it is made mandatory for businesses. Contact us today for more information about the latest developments.
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