In a recent development, HM Revenue and Customs (HMRC) has announced that the implementation of Making Tax Digital (MTD) for corporation tax will not go ahead. This news has been met with mixed reactions, with some businesses feeling relieved while others are disappointed. However, given the current economic climate, this decision seems to be a practical and necessary step.
For those who are not familiar with MTD, it is a government initiative that aims to make the tax system more efficient and effective by requiring businesses to keep digital records and submit their tax returns digitally. The scheme was initially introduced for VAT-registered businesses in April 2019 and was supposed to be expanded to include corporation tax from April 2022. However, after careful consideration, HMRC has decided to scrap the plan for corporation tax.
The decision to not go ahead with MTD for corporation tax has been welcomed by many small businesses and SMEs in the UK. The pandemic has hit businesses hard, and the last thing they need is another burden of compliance and additional costs. The MTD scheme would have required businesses to invest in new software and systems to comply with the digital record-keeping and submission requirements. This would have been an added expense for businesses that are already struggling to survive.
Furthermore, the MTD scheme would have also increased the administrative burden for businesses. Small business owners are already juggling multiple responsibilities, and adding another compliance task would have been overwhelming. The fear of penalties for non-compliance would have added unnecessary stress to an already challenging situation.
HMRC’s decision to scrap MTD for corporation tax is a testament to the government’s willingness to listen to the concerns of small businesses. The consultation on MTD received over 3,000 responses, with the majority expressing concerns about the potential costs and administrative burden. The government has acknowledged these concerns and has taken a pragmatic approach by not going ahead with the scheme.
While the news of MTD for corporation tax being scrapped may come as a relief for many businesses, it does not mean that digitalisation is off the table. The government remains committed to modernising the tax system and making it more efficient. In fact, MTD for income tax is still set to go ahead from April 2023, and businesses should start preparing for it.
MTD for income tax will require self-employed individuals and landlords with annual business or property income above £10,000 to keep digital records and submit their tax returns digitally. This will bring the tax system in line with the digital age and make it easier for individuals to manage their tax affairs. It will also reduce errors and improve the accuracy of tax calculations, resulting in fairer tax assessments.
In conclusion, the decision to scrap MTD for corporation tax is a positive step towards reducing the burden on small businesses. The government has shown its willingness to listen to the concerns of businesses and adapt to the current economic situation. However, this should not be seen as a reason to become complacent about digitalisation. MTD for income tax is still on the horizon, and businesses should start preparing for it. Embracing digitalisation will not only make tax compliance easier but also help businesses to thrive in the long run. So, let’s welcome this change and look forward to a more efficient and modern tax system for the UK.