MTD's start date for self-employed deferred

The requirement for freelancers to report tax online ‘at least quarterly’ as part of Making Tax Digital has been postponed, in a surprise government announcement on Finance Bill 2017.

In a statement yesterday, the Treasury said that changes to tax legislation which were dropped from the bill in April will still go ahead. But not the 2018 compulsory start of MTD.

“Businesses will not be mandated to use the MTD system until April 2019 and then only to meet VAT obligations,” said the Treasury, describing the delay as a ‘policy change.’

“This will apply to businesses with turnover above the VAT threshold. Businesses with turnover below the VAT threshold will not be required to use the system but can choose to”.

In other words, only self-employed business owners with a turnover of more than £85,000 will need to keep digital records, and only for VAT, from 2019.

As to the Treasury’s line about choosing it, it likely means that traders will not be invited to jump to MTD and adopt quarterly tax reporting for other taxes until at least mid-2020.

The official statement confirms: “The government will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020”.

Business advisory RSM welcomes the new timetable, which it said is effectively replacing the previous “unrealistic” one (forcing all self-employed people to use it from 2018).

“In the end, HMRC had little choice to postpone…[partly due to] the genuine alarm being expressed by affected businesses,” it said. “The MTD initiative was simply one project too far.”

But that doesn’t mean that ‘at least’ quarterly tax reporting online is wrong in principle, according to RSM tax consultant Andrew Hubbard.

“We remain of the view that the core philosophy underlying MTD is the right one to pursue, and that eventually taxpayers, agents and HMRC will see the benefit of digital interaction with the tax system.

“If the system is as effective as we all hope, individuals and businesses will not need compulsion but will want to adopt it.”

However, the Treasury’s decision to delay the start date for the self-employed gives the taxman some “much needed time to concentrate on building the system successfully.”

“And to make it so attractive that businesses will actively want to sign up,” Hubbard added. “For now though, businesses will have a choice as to the timing. As a result, there will be a lot of accountants and small business owners who will today be breathing a huge sigh of relief.”

Editor’s Note: Related –

‘£10K freelancers’ let off quarterly tax reporting

Foot traders’ bills for quarterly tax reporting, HMRC told

MP echoes doubts over quarterly tax system


13th July 2017

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