QUESTION: I understand that the proposed making tax digital scheme has been delayed. Why is this and what do I need to do now?
ANSWER: Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs - meaning the end of the annual tax return for millions.
Plans to force millions of businesses and self-employed people to file multiple tax returns each year have been shelved by the government. Legislation to implement the government’s MTD initiative has been removed from the Finance Bill 2017 following Theresa May’s announcement of a general election on June 8. This will allow time for these complex measures to be debated after the election has taken place.
The accountancy profession predicts that this decision, which was due to hit large businesses from 2018 and small businesses from 2019, will be delayed by at least a year. It also raises the possibility that it could be scrapped altogether. The move is a result after blanket opposition against the proposals from tax payers, business groups and senior political figures across all parties.
Those who were expected to be worst hit by the MTD scheme will be the self-employed with turnovers of more than £85,000 who from April 2018 will have to file at least five returns per tax year in addition to regular VAT returns. At present small businesses and the self-employed are obliged to file tax returns online or by post once a year.
It is likely that these clauses and schedule will be reintroduced after the election which will allow more time for proper scrutiny and debate. Pending reintroduction of the provisions after the general election, it is hoped that the government will prioritise addressing the detailed questions that have been raised about how MTD will work in practice and the government’s decision to defer this legislation could be very good news.
However, it is unclear if this is a temporary deferral pending a second finance bill after the election or whether it will be more permanent. If this is a temporary deferral, taxpayers who are affected may have even less time to prepare for the legislation and may be left floundering in an information vacuum. It would be far more preferable if the government had set a time scale for the deferral – a minimum of one year.
The MTD idea was first announced by the former Chancellor, George Osborne, who ruled that small business owners, the self-employed and landlords must provide digital quarterly updates to HMRC which he estimated would generate £2 billion extra in tax per year for the government.
When MTD is fully implemented, a taxpayer will no longer need to submit the same details to numerous places as the information about pensions, employment, PAYE codes will all be gathered together to calculate tax.
Other measures to be dropped from the Finance Bill include changes to non-domicile rules and inheritance tax amendments to UK residential properties.
:: Malachy McLernon (m.mclernon@pkffpm.com) is a director of PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
