Plans to bring businesses into a modern online digital reporting environment have already been well publicised, although the short timeframe for small businesses has been widely criticised. Spring Budget 2017 has announced a deferral of registration for small businesses by one year. The revised timetable is as follows:
- April 2018 for businesses with turnover in excess of the VAT threshold (£85,000 from 1 April 2017) chargeable to income tax and Class 4 national insurance
- April 2019 for businesses that have turnover below the VAT threshold chargeable to income tax and Class 4 national insurance
- April 2019 for VAT reporting if registered and pay VAT
- April 2020 for entities chargeable to corporation tax
Although a deferral for small businesses is welcome, it falls short of a full exemption for micro-businesses. There is an exemption if turnover is less than £10,000 per year, although employed individuals with secondary income of greater than £10,000 per year will be required to register.
The proposals for Making Tax Digital for Business will bring in legislative changes so that businesses will have a prescribed method of keeping records digitally, filing quarterly data and an obligation to finalise the accounts within 10 months of the fourth quarter. For VAT, the quarterly reporting will effectively replace the traditional VAT return.
Parliament believes this will provide taxpayers with more up to date and relevant information regarding their tax liabilities and reduce errors by 10%.