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Government’s digital tax U-turn welcomed by trade body

The government yesterday announced a U-turn on the extent of the 'Making Tax Digital' requirements, and the move has been warmly welcomed by the National Landlords Association (NLA).

Plans to make landlords submit tax returns digitally were pushed back in March, with the chancellor Philip Hammond announcing in his Budget statement that the measure, known as ‘Making Tax Digital’, would be delayed by one year for landlords with a turnover below the VAT threshold.

The government wanted to provide landlords with more time to prepare for digital record keeping and quarterly updates, and as a result, the implementation was supposed to happen in April 2019.

Making Tax Digital was originally announced by the now former chancellor George Osborne in the 2015 Autumn Statement, with a view to digitising the tax system with the self-employed, small businesses and unincorporated landlords needing to keep digital records and use software to update HMRC quarterly.

But the plans have faced criticism from MPs, the Treasury Select Committee, business and professional bodies, with various bodies, such as the NLA, raising a number of concerns and reservations, as illustrated by its response to the Making Tax Digital consultation last year.

The trade body believed that the £10,000 income threshold for unincorporated property businesses should be raised, had  concerns with the workability of the software and IT systems and recommend a longer lead-in period before the scheme becomes mandatory for small businesses, the self-employed and landlords, while it also insisted that there be a backup option for those landlords who genuinely could not take part, with sufficient financial and educational support needed to help landlords meet the deadline.

So the changes announced by the new financial secretary to the Treasury Mel Stride have been welcomed by the NLA.

The changes announced by the MP include not making it mandatory for businesses with turnover above the VAT threshold of £85,000 to use the MTD system until April 2019 and then only to meet VAT obligations, not forcing businesses with turnover below the VAT threshold to use the system but can choose to do so, while businesses will also be able opt in for other taxes, benefitting from a streamlined, digital experience.

In addition, the government will not widen the scope of MTD beyond the VAT threshold before the system has been shown to work well, and not before April 2020 at the earliest.

This will ensure that there is time to test the system fully and for digital record keeping to become more widespread

You can read the MP’s statement here.

A study conducted by the Residential Landlords Association last year found that 48% of landlords use spreadsheets for record keeping; 38% use paper records and just 13% use specialist software.

Commenting on the government’s decision to U-turn on its Making Tax Digital Programme, Richard Lambert, chief executive officer at the NLA, said: “We are pleased that the government has finally listened to the concerns raised by the NLA on behalf of landlords who would have been dragged into a system of tax reporting rushed into being before they or it are ready.

“While we have always supported simplifying the tax system, we were concerned by the issues raised by the Making Tax Digital programme, and welcome the changes announced by the new Financial Secretary to the Treasury Mel Stride MP, as they address exactly the points we’ve been raising since the initial announcement.

“However, rather than being evidence that the Government is willing to work with the industry, this has come about because they no longer have the majority to push through such controversial plans”

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