Further to concerns raised during the consultation, the UK Government has decided to provide 3.1 million small businesses with more time to prepare for Making Tax Digital. Businesses (including the self-employed and landlords) that have annual turnover below the VAT registration threshold will have an extra year before they are required to keep records digitally and send HMRC quarterly updates, although they will be able to start doing so voluntarily from April 2017.
Those with annual turnover above the VAT threshold will still be required to keep digital records and send HMRC quarterly updates from April 2018 and the public beta testing will start, as planned, from April 2017. The exemption threshold, previously announced, will remain at £10,000.
It was felt that businesses that have annual turnover below the VAT registration threshold are currently less likely to keep digital records than larger businesses. Whereas businesses that are VAT registered already engage with HMRC on a quarterly basis online and so are better placed to make the transition to keeping digital records and updating HMRC quarterly.
The extra year is also to allow HMRC to deliver targeted support for small businesses such as guidance and online training. From April this year, HMRC will begin its Making Tax Digital pilot with businesses and tax agents to learn what works well.