The Finance Bill 2017-19, set to become the Finance Act 2018, had its second reading in Parliament yesterday. The Bill is providing further clarity and detail around Making Tax Digital (MTD) reporting, set to impact on businesses with a turnover greater than the VAT threshold initially for VAT purposes only from 2019, before businesses are asked to keep digital records for other taxes from 2020 onwards.
While the delays to MTD announced earlier this summer were welcomed by most, given the positive impact on the self-employed, accountants and HMRC themselves, the Finance Bill underlines the Treasury’s commitment to making MTD a reality.
The latest version of the Bill further outlines those who will be excepted from committing to quarterly digital reporting, outlines provisions for MTD regarding income tax, and details clauses for MTD regarding VAT. AAT is pleased that the Government is reiterating that the UK will, over the coming years, have the most digitally advanced tax system in the world, but is equally pleased that small steps are being taken towards implementing the programme rather than rushing in with a system with the inherent risk that it may not be fit for purpose. This will help win the hearts and minds of taxpayers, who as a result will have more opportunity to understand and engage with MTD.
Tax returns are going to enter the digital age, and while businesses have been afforded more time to get used to the idea, they should nonetheless act sooner rather than later to understand the requirements they will face, and indeed whether they may need to improve their digital connections in order to be able to comply with quarterly reporting.
AAT will continue to press for the ultimate MTD threshold not to return to £10,000 but instead be set at the personal allowance (currently £11,500). By linking the threshold to the personal allowance at the end of this two-year period, the need to regularly revisit the limits of an arbitrary figure is avoided.
Less than 5% of AAT licensed accountants who responded to an AAT survey on MTD supported the £10,000 limit. In contrast, 65% supported an £11,500 limit.
The latest Finance Bill 2017-19 can be read on the Parliament website.