Changes to digital tax plans welcomed

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Changes to a controversial new tax system have been announced by the Government.

The timetable for bringing in the Making Tax Digital (MTD) initiative has been extended.

The scheme covers the introduction of digital record-keeping and quarterly updates for the majority of businesses, self-employed people and landlords.

However, only businesses with a turnover above the VAT threshold, currently £85,000, will now have to keep digital records for VAT purposes from 2019.

Businesses will not be asked to keep digital records, or to update HM Revenue & Customs (HMRC) quarterly, for other taxes until at least 2020, under the proposals.

Financial Secretary to the Treasury and Paymaster General Mel Stride said: "Businesses agree that digitising the tax system is the right direction of travel.

"However, many have been worried about the scope and pace of reforms.

"We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses."

The move follows widespread concern voiced about the initial timetable, including by a number of Tory MPs.

The House of Lords Economic Affairs Committee said the previous timetable for implementation of MTD from April next year was "rushed" and that many small firms were not ready to cope with the additional administrative and financial demands of digital taxation.

Phil Hall, of the Association of Accounting Technicians, said: "Having a two-year implementation programme will greatly benefit all concerned, is a victory for common sense and indicates the Government's willingness to take on board industry views."

National chairman of the Federation of Small Businesses, Mike Cherry, said: "We're delighted that the Chancellor's team in the Treasury has listened to our concerns about the mandatory aspects of Making Tax Digital, and has now decided to change their planned timetable.

"The exemption of the very smallest firms below the £85,000 turnover VAT threshold has been FSB's top priority for reform, and now millions of business owners will be relieved.

"This is a positive decision and will be a real lifeline for small firms already facing a hugely challenging economic climate."