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Many SMES will benefit from the delayed timetable changes to Making Tax Digital

Proposed changes to the roll-out of the UK Government’s plans for businesses to keep digital records and report quarterly online are expected to be approved this month but at least they will be rolled out rather than introduced immediately.
I have previously expressed concern about the impact of quarterly reporting by SMEs, especially as most only see their accountant once a year when they report annual accounts as required under current legislation.
The timetable and other changes mean that from April 2019 only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for reporting their VAT under new scheme, called Making Tax Digital (MTD).
It will also mean that businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least 2020.
The Government has made it clear that it wants to test the new system thoroughly before rolling it out making it even possible that the deadline may slip further.
HMRC is expected to start a small-scale pilot of MTD for VAT by the end of this year, then widen the scope into a larger pilot starting Spring 2018.
The Government has also announced that MTD will be available on a voluntary basis for the smallest businesses, and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system. They will also be given at least two years to adapt to the changes before being asked to keep digital records for other taxes.
The changes are expected to be approved during passage of the Finance Bill 2017, expected to take place this month, September 2017.
The changes have been welcomed by business groups, particularly by the FSB (Federation of Small Businesses) whose chairman Mike Cherry said it was a very positive decision and a welcome relief to the smallest businesses that were “already facing a hugely challenging economic climate”.

Why would any business pay more tax than it needs to?

The subject of tax payment cannot avoid being a political football, especially as an election approaches.
But if there is to be a genuine debate, and genuine clarity about what each political party actually stands for on tax and businesses then there needs also to be clarity about what is and is not legal.
Tax evasion is illegal, tax avoidance is not.
Given that all benefit from the “public goods” such as education and transport infrastructure, and these have to be paid for, no business or indeed no one I know would quarrel with paying a fair amount of tax.
But beyond that it could be argued that a company’s directors have a duty to minimise their business tax bill in order to maximise profits, in other words to avoid paying taxes they don’t have to. That is why people use accountants and other financial advisors.
It is fair enough for politicians to want to close loopholes that allow large corporations to “game” the system and avoid paying their fair share.
However do we really want a tax regime that rests on politicians telling us how much income we are permitted to have, as the Labour Party seems to want to when attacking tax avoidance? Surely that is perilously close to communism?
The press isn’t immune as turnover is often cited instead of profits when referring to tax.
What we would all like to see is a taxation system that prevents tax avoidance by corporations using offshore accounts to keep more than their fair share of profits while still benefiting from the public goods that allow them to operate profitably in the UK.