UK: Revised timetable for introduction of digital tax system

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Following feedback from parliament including the Treasury Select Committee, business and professional bodies the UK government is delaying the introduction of a compulsory digital tax system for certain businesses and landlords.

The system called Making Tax Digital is intended to provide a streamlined online system to for maintaining tax records and providing information to HMRC. Under Making Tax Digital businesses would eventually be required to file quarterly tax returns online. Taxpayers would have an overview of all their tax affairs in one place, making it easier for them to offset overpayments on one tax against liabilities on others. The analysis of the information would also enable HMRC to more easily detect non-compliance and will therefore reduce their administration costs.

The timetable for introducing Making Tax Digital has been changed to give businesses more time to adapt to the changes. Under the revised timetable businesses with a turnover above the value added tax (VAT) threshold (currently GBP 85,000) will be required to keep digital records for VAT purposes from 2019 onward. Digital records for other taxes will not be required from business until 2020 at the earliest.

Businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.

A trial of the digital system for VAT will start before the end of 2017, beginning with small-scale testing and then a wider trial starting in Spring 2018. There will therefore be more than year of testing before any businesses are obliged to use the system. After the changes to VAT reporting take effect from April 2019 businesses above the VAT threshold must provide their VAT information to HMRC through Making Tax Digital software.


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