The Chancellor announced a one year deferral from the mandating of Making Tax Digital for unincorporated businesses and landlords with turnovers below the VAT threshold, which is currently £83,000.
KPMG tax partner Mandy Pearson responds:
“Making Tax Digital (MTD) is one of the most fundamental changes to the UK’s tax system in a generation and, while public awareness seems to be quite low, the changes are due to come into effect for Income tax and NIC from 6 April 2018.
“Our position was, and remains, that we are fully supportive of a digital tax system; without doubt this is the future. But whilst we welcome today’s announcement as both pragmatic and sensible as it takes many small unincorporated businesses and landlords out of the new regime for another year, the fact remains that, for those over the VAT threshold, MTD will become reality on 6 April 2018, with mandation for the rest to follow from 6 April 2019.
“Like others, including the Treasury Select Committee, we continue to have concerns that the timetable for implementing what is an enormously complex IT project is incredibly challenging. Not just for HMRC but also for businesses, who need to prepare for the transition. As matters stand, there remains a considerable degree of uncertainty around how MTD will look and work day-to-day. And the critical component, the software that will bring MTD to life, remains under development. Until more clarity is provided around the details and software comes onto the market, businesses will have no choice but to wait and see, which is far from ideal for those with only a year until they have to adopt MTD.
“We continue to believe that the MTD transition should be voluntary in the short term; if it truly is a more efficient approach, businesses will naturally migrate at a pace that suits their operations and budgets.”
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