The changes to mandatory digital record keeping for businesses over the VAT threshold comes into force from 1 April with the onset of MTD. This is an important first step in this modernisation of the tax system and to which the government remains committed, irrespective of the outcome of current Brexit discussions. Today, in his Spring Statement the Chancellor confirmed a ‘light touch approach to penalties in the first year of implementation’. Which in real terms means that where businesses can show that they are doing their best to comply, no filing or record keeping penalties will be issued.
However, where the significant changes occur are in relation to the digitalisation of self-assessment tax returns which were due to fall under the same MTD requirements as businesses in 2020, but which the Government has stated will now no longer come into effect next year. Instead the focus for both the Government and HMRC in 2020 will be on supporting businesses in their transition to digital filing.
According to Graham Doubtfire, Tax Partner the pushing back of the self-assessment deadline is a sensible step by HMRC as it will allow the new system to be fully bedded-in before MTD is applied to other taxes and will allow businesses time to adapt and comply with their obligations without fear of substantial penalties.