The government has caved into pressure and toned down its “making tax digital” plans for smaller businesses.
Ministers announced today that 3m of the smallest businesses and landlords will “be able to move to the new digital system for keeping tax records at a pace that is right for them”.
Under the new rules, only businesses with a turnover above the VAT threshold, currently £85,000, will have to keep digital records, and only for VAT purposes. They will only need to do so from 2019. And businesses will not be asked to keep digital records, or update the taxman quarterly, for other taxes until at least 2020.
The government said the “making tax digital” plans shake-up was in response concerns raised by MPs, the Treasury Select Committee, businesses and professional bodies “about the pace of change”.
“Businesses agree that digitising the tax system is the right direction of travel,” said paymaster general Mel Stride MP. “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.”
Jonathan Riley, head of tax at Grant Thornton, said: “Whilst it is pleasing that the government has listened and reflected on those with concerns over the pace of making digital our tax regime, it does not bode well for the progress of more fundamental reform of our complicated tax regime.
“What all tax stakeholders need is a brave approach to reducing complexity, one that boosts transparency and in turn improves trust in and compliance with our tax system.”