Plans to increase the frequency of reporting by the self-employed and small businesses, under the Governments Making Tax Digital (MTD) scheme, have been delayed. The next phase of roll out for MTD would have seen self-employed and small business required to maintain digital records and report their income to HMRC every quarter from April 2023. However, following pressure from industry bodies and as a result of the issues caused by the pandemic, the Treasury have announced that the introduction date will be pushed back by 12 months to April 2024.
Live Tax Accounts the Ambition
This is the latest in a series of set backs for the MTD grand plan which has the long term goal of creating ‘live’ tax accounts for each individual and each company. By having live tax accounts connected to PAYE, VAT, bank accounts, investments etc. the idea is that the tax system will be more efficient, more accurate and timelier. The ultimate aim being the eradication of self-assessment tax returns for individuals, with tax collections moving to more of a pay-as-you-go style system.
Brexit and Covid Delays
Other aspects of the MTD roll out have already been shelved entirely or delayed, mainly over the last few years as both Brexit preparations and then Covid have dealt a blow to the Treasury plans and required them to divert effort away from long term structural changes.
MTD for VAT Rollout Continues and Expands
One element of the MTD process not affected by this latest delay is the extension of MTD for VAT. VAT registered companies that exceed the VAT threshold are already up and running on the systems and have been for some time. But from April next year, MTD for VAT will be compulsory for all VAT registered businesses. This will mean that some of those small businesses noted above will still need to make changes to ensure their systems are complaint and can report digitally by the end of this current tax year.