The fact that 72 clauses have been dropped from the Finance Bill 2017 might not exactly be topping your social media stream at the moment. But this is actually pretty good news for small business owners as one of those lost was Making Tax Digital.
So what’s this all about?
One thing I’m sure that you are aware of, is that last week Teresa May called a snap General Election for the 8 June 2017. This means that the current session of Parliament will now finish on 3 May. The 2017 Finance Bill currently going through Parliament is one of the biggest ever. In order to get the bill through before the 3 May deadline it’s been pruned right back losing 72 of its 135 clauses.
But why is this important?
One of the items that’s been taken out of the bill is Making Tax Digital which was supposed to come into force in April 2018 for sole traders.
The Making Tax Digital initiative aims to reduce tax return errors by making the system more integrated, efficient and real time. Taxpayers would have to submit digital returns at least five times per year.
The scheme has not been popular however – it’s been the a real tax bogeyman for both accountants and small businesses. There’s been a lot of trepidation about how Making Tax Digital will actually happen and the impacts it will have.
There’s already been one delay announced in the Spring Budget 2017, giving sole traders below the VAT threshold an extra year, extending their implementation until April 2019.
So does this mean that Making Tax Digital is finished?
At the moment no one knows exactly what will happen and it’s likely to be affected by the outcome of the election.
It looks likely that Making Tax Digital will still go ahead, in some shape or form, but not to the original timescale.
The principles behind the initiative of real time information, everything in one place and digital submission will remain valid for both HMRC and business owners.
The danger was that the baby was being thrown out with the bathwater in the rush to get the scheme implemented. The existing plan seemed to offer very few advantages for the small business owner and lots of extra hassle.
The good news is that there’s going to be more time to think about how these principles are implemented and the impacts they’ll have. Hopefully when Making Tax Digital does arrive, it’ll be in a form that offers benefits to both HMRC and business owners.
What do I need to do?
Although the deadlines have gone away temporarily, Making Tax Digital in some incarnation is still likely looming on the horizon for the future.
So now is a great opportunity to get ahead of the game. You can still being giving some thought as to how you’ll deal with digital submissions, investigating your options and making some gradual changes, so that when Making Tax Digital does finally arrive, it’s less of a big step and more of a smooth transition.
Or you can bury your head in the sand, keep your fingers crossed and hope it all goes away – you never know, we’ll just have to wait and see!