"The delay should also allow time for HMRC to ensure that the new system is properly tested and fine-tuned"

LITRG welcome one-year deferral of mandatory digital reporting for small businesses

LITRG welcomes the announcement today that self-employed businesses (including landlords) with a turnover below the VAT threshold (£85,000 with effect from 1 April 2017) will not now be required to comply with HMRC’s Making Tax Digital (MTD) programme until April 2019.

Anthony Thomas, chair of LITRG commented:

“This 12-month deferral period means that smaller businesses and landlords will have longer to prepare for the new obligation to keep digital business records and submit quarterly reports of income and expenditure, which is welcome as many risk finding the new rules very onerous and overwhelming. The delay should also allow time for HMRC to ensure that the new system is properly tested and fine-tuned as necessary for this group of taxpayers, so that there are fewer teething problems by April 2019. In particular it will enable the pilots due to start in April 2017 to run a full cycle of four quarterly reports and an end-of-year declaration, and for the software companies to make any changes indicated during the tests, before the smaller businesses come on board.”

LITRG has previously pointed out that there must be alignment of the rules that apply to quarterly reporting for MTD purposes with those that apply to reporting for universal credit purposes, otherwise some of the smallest businesses could be required to make at least 16 different reports of business income and expenses to Government departments each year. It is hoped this can be addressed during the deferral period too.

But it has been confirmed that the turnover threshold above which businesses will be required to keep digital records and report quarterly to HMRC will remain at £10,000.

Anthony Thomas said:

“We are very disappointed to note that there will be no change to the lower threshold of £10,000 below which a business is exempt from the new digital tax regime. We will continue to press HMRC to raise the exemption threshold substantially from the current turnover level of £10,000.”

Note to editors

1.       Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk  (Out of hours contact: George Crozier, 07740 477 374)