Quantuma director, Brian Burke welcomes a delay in the digital tax changes, but urges early preparation
Delay on digital tax changes welcomed but businesses need to prepare now
Corporate recovery specialist at Quantuma have welcomed the Chancellor’s decision to introduce a breathing space into the move towards Making Tax Digital (MTD).
Quantuma director Brian Burke said the Chancellor had been wise to take heed of the warnings of many business advisers.
“There is no doubt that HMRC’s digital transformation and the development of a tax system fit for the 21st century is a necessity, so in granting the smallest businesses more time to adopt MTD, it was positive that the Chancellor acknowledged what many have already voiced,” he said.
The transfer of tax records to digital software, updating HMRC quarterly and filing annual tax returns online was felt to create a significant burden on certain businesses.
An extension until April 2019, will now be applied to unincorporated businesses with annual revenues below the £83,000 UK VAT threshold.
Brian Burke said: “This is a level that many feel is much more appropriate compared to the £10,000 annual revenue threshold that will now subsequently apply from April 2019 onwards.
“In addition, the government’s aim to simplify the tax rules for businesses, landlords, and the self-employed, to reduce administrative burdens should help to ensure that regular digital updates work smoothly.”
This would the increased availability of opting for cash basis accounting, a simplified method for calculating taxable profits for trading businesses with straightforward tax affairs, as it becomes more widely available with the increase of the entry threshold from £83,000 to £150,000.
For many achieving the April 2018 target still remains a daunting prospect.
Concerns over the speed of the roll out, ability to adapt, the administrative burden and the associated costs have all been highlighted and remain.
Mr Burke said: “For those who benefit from the Budget announcement, the postponement to April 2019 will only act to delay the inevitable.
“There are many above the UK VAT threshold for whom transition remains high on their list of concerns. More time and increased access to the cash basis can only help to allay these fears.”
He pointed out that the direction of travel, which had been established some two years ago when MTD was announced in the March 2015 budget, was proving distinctly different to the journey.
“Even if the change is ultimately positive many will now be monitoring the progress of HMRC’s plans to beta test its MTD reporting system,” he said.
This is scheduled to start next month with up to 100 users ahead of a more significant trial with the aim to have some 400,000 users, including landlords, the self-employed and sole traders, piloting the reporting system by October 2017.
Similarly, the outcome of negotiations with software developers along with the expected availability of free entry-level software to ease the transition of MTD reporting will be eagerly anticipated.
He concluded: “The Budget announcement, in addition to taking a more sensible approach, underlines once again the importance of self-employed, unincorporated business owners and buy-to-let landlords ensuring they stay ahead of the curve on MTD.”
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Notes to Editors
Quantuma LLP is a leading restructuring and insolvency practice delivering partner-led solutions to businesses and individuals facing financial distress with offices in London, Southampton, Marlow, Watford, Brighton and Bristol.